-GOVERNMENT BONDS-
Anticipating Fixed 7-DRRR BI, Investors Interested in Long Tenors. Yields FR0080 and FR0083, respectively decreased by around 1.5 bps and 0.1 bps. Meanwhile, short and medium tenors experienced an increase in yield. A number of market players are anticipating and waiting for the results of the meeting of the Board of Governors of Bank Indonesia (RDG-BI) which took place yesterday and today. Based on market consensus, the national central bank is expected to maintain its benchmark interest rate. The depreciation of the rupiah since the beginning of 3Q20 made it difficult for BI to reduce the BI 7-DRRR, even though the Indonesian economy was heading into recession. In addition, investors are also watching the Fed’s interest rate policy. Investors are optimistic that the Fed will maintain its benchmark interest rate. For the record, when the benchmark interest rate remains in the midst of increased recession risk. This has prompted investors to look for investment alternatives, namely SBN with a long tenor.
-CORPORATE BONDS-
Smartfren Converts IDR 3.4 Trillion Bonds trillion. The plan was approved at the Extraordinary General Meeting of Shareholders (EGMS) on August 14, 2020. The number of shares resulting from the conversion of OWK II and III was 34 billion series C shares or 42.5% of the total OWK of 80 billion shares. The conversion exercise price is IDR 100 per share. Previously, Smartfren had issued OWK worth IDR 8 trillion or as many as 80 billion shares in 2014 and 2017. This year, the company has budgeted a capital expenditure (capex) of USD 250 million – USD 260 million. Until 1H20, the company has used USD 170 million – USD 180 million of the total capex for network expansion through the construction of BTS. Until 1H20, Smartfren recorded revenues of IDR 4.3 trillion, up 41.98% compared to the same period the previous year. This revenue came from the telecommunications segment, namely IDR 3.91 trillion from data business and IDR 226.52 billion non-data income. Then, interconnection income was IDR 61.69 billion and other income was IDR 101.83 billion. (Investor Daily)
-MACROECONOMY-
Inflation and Rupiah Volatility Hold BI 7-DRRR. Some economists project that BI will continue to maintain monetary policy, while the BI 7-DRRR for September is projected to remain at 4% level. The volatility of the rupiah was in line with the one month implied volatility of September which increased to 11 percent from 10.7 percent in the previous month. BI’s commitment to prioritizing quantitative easing. On the other hand, BI continues to consider room for cutting interest rates, after August 2020 inflation was recorded at 1.32% YoY or below BI’s target of 2%. BI also sees the trade balance which is still in surplus in August 2020. For the record, monetary policy requires strengthening of fiscal policy, in order to maximize benefits. (Kontan)
-RECOMMENDATION-
Inflation and Rupiah Volatility Hold BI 7-DRRR. Some economists project that BI will continue to maintain monetary policy, while the BI 7-DRRR for September is projected to remain at 4% level. The volatility of the rupiah was in line with the one month implied volatility of September which increased to 11 percent from 10.7 percent in the previous month. BI’s commitment to prioritizing quantitative easing. On the other hand, BI continues to consider room for cutting interest rates, after August 2020 inflation was recorded at 1.32% YoY or below BI’s target of 2%. BI also sees the trade balance which is still in surplus in August 2020. For the record, monetary policy requires strengthening of fiscal policy, in order to maximize benefits.
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