Today’s Outlook:
The US reported July manufacturing data which appears to have stabilized at contractionary levels, as new orders gradually improved, while a survey showed factory employment dropped to a three-year low, suggesting that layoffs were accelerating. The US ISM Manufacturing PMI (July) came in at 46.4 which was lower than the estimate of 46.8 but a slight improvement from the previous month’s 46.0. ISM Manufacturing Employment (July) weakened to 44.4, the lowest level since August 2020. On the other hand, JOLTs Job Openings for June fell to 9.582mn from 9.616mn in the previous month. Signs of weaker labor demand are likely to be welcomed by the Federal Reserve and increase expectations that there may be no need for further interest rate hikes.
The dollar index, a measure of the greenback against six major currencies, rose 0.40%. A stronger dollar makes crude more expensive for investors holding other currencies. To revive China’s private sector amid a flagging economic recovery following a protracted period of COVID restrictions, Chinese ministries, regulators and the central bank on Tuesday pledged more financing support to small businesses. Meanwhile, data released on Monday potentially curbed market enthusiasm as data showed Euro Zone manufacturing activity contracted in July at the fastest pace since May 2020, although the Euro Zone Unemployment Rate (June) did not budge from 6.4% (same as the previous month), the lowest level in more than 20 years.
From the Asian continent, South Korea and Japan successfully reported higher than expected Manufacturing PMI (July) although both still stayed in contraction territory aka below 50 points. While the Nikkei Manufacturing PMI (July) level for Indonesia was more expansionary at 53.3, up from June at 52.5. Indonesia reported a more manageable July Inflation at 3.085% yoy, lower than expected 3.1% and previous month’s 3.52%. Core Inflation also tamed further at 2.43%, lower than forecast of 2.5% and June at 2.58%. S&P Global Indonesia Manufacturing PMI increased to 53.3 in July from 52.5 in June. This is the 23rd consecutive month of expansionary growth in factory activity.
As for this morning, South Korea has reported CPI growth (July) at 2.3% yoy and 0.1% mom, both below expectations. Speaking of PMIs, France, Germany, Euro Zone and the UK reported PMIs that weakened further in contractionary territory. Later in the evening, the world will again monitor employment data from the US, namely ADP Nonfarm Employment Change (July) which is expected to drop to 188k from June’s 497k.
Corporate News
Merdeka Copper Gold (MDKA) Repays Bonds and Interest Worth IDR 745.41 Billion PT Merdeka Copper Gold Tbk (MDKA) reported that it has paid off the principal and 12th interest payment of the Merdeka Copper Gold Sustainable Bonds I phase I 2020 series B. This repayment was made by MDKA on Sunday (7/30). The amount of bonds maturing on July 30, 2023 consists of principal bonds worth IDR 726.35 billion and 12th interest bonds of around IDR 19.06 billion. Thus, the total principal repayment and interest payment for the 12th bond is IDR 745.41 billion. The source of funding used by MDKA to make this repayment comes from internal cash. (Kontan)
Domestic Issue
Prepare Your Funds, Retail Sukuk Series 019 Will Be Released Soon After successfully selling ORI023, the government is again planning the issuance of the latest series of retail government securities (SBN). The bond that will be issued to the retail market in the near future is the Retail Sukuk (SR) SR019 series. If nothing goes wrong, the sharia investment product will be offered on September 1-20, 2023. The plan is that SR019 will be issued in two series at one time (dual tranches). “Just like the previous retail SBN issuance this year,” Director of Sharia Financing at the Ministry of Finance’s DJPPR Dwi Irianti Hadiningdyah told KONTAN. The government has so far not determined the amount of the SR019 coupon. Factors that will be considered are the latest market conditions, as well as adjusting the government’s financing strategy. “The coupon is expected to be at an attractive level for investors,” she said. Meanwhile, the target value of SR019 issuance will not be much different from the target set for the previous SBN sitel this year. Previously, ORI023 sold as much as IDR 28.9 trillion and SR018 sold IDR 21.49 trillion. (Kontan)
Recommendation
US10YT uptrend is relatively intact and on the way to the upper channel TARGET at yield : 4.243%; however, it is better to AVERAGE UP above the Resistance of the previous High level of 4.094%. ADVISE: Wait & See; Average Up accordingly.
ID10YT is attempting to test MA50 Resistance at a yield of 6.305%. ADVICE: Average Rise as expected. TARGET: yield 6.384%.
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