Today’s Outlook:
US MARKETS: Upbeat economic data continued to emerge ahead of the Federal Reserve’s annual Jackson Hole meeting. Survey data from the UNIVERSITY OF MICHIGAN released on Friday showed that consumer sentiment recovered in August for the first time since May, boosted by developments in the US presidential election, which further eased concerns about the economy. Consumer expectations about inflation over the next 1 year and 5 to 10 years were also unchanged, at 2.9% and 3% respectively, reinforcing expectations that the Fed’s policies are working, just as focus turns to Fed Chairman Jerome Powell’s speech next week in JACKSON HOLE, Wyoming. UBS economists expect Fed Chairman Jerome Powell to outline the rationale for monetary policy easing more clearly in a speech at Jackson Hole on Friday August 23, by which they mean an affirmation of a 25 basis point rate cut, rather than 50 basis points. Fund managers are also fairly confident the US will not go into recession, but markets are likely to be more volatile until later this year, especially around the US presidential election in November. The US 10-year bond yield fell 4 basis points to 3.883%.
U.S. POLITICAL MAP: US Presidential candidate KAMALA HARRIS on Friday outlined her economic agenda focusing on tax cuts, affordable housing and lower food prices, which the Democratic presidential candidate believes will create opportunities for the middle class. The speech comes ahead of the Democratic National Convention on August 19-21, when Harris has the opportunity to build on her momentum by introducing herself and expanding on her policies to win over uncommitted voters. Harris now has a 2.8- point lead over Trump in the latest average of national polls compiled by FiveThirtyEight.
ASIA & EUROPE MARKETS: The Dollar fell against the Yen on Friday, and weakened against other major currencies after the release of disappointing US housing figures. US single-family home construction fell in July as higher mortgage rates and home prices discouraged buyers, suggesting the property market remained depressed at the start of the third quarter. The Euro rose 0.47% against the Dollar. Happy Retail Sales conditions also prevailed in the UK where their Retail Sales (Jul) rose in line with expectations.
COMMODITIES: OIL prices fell almost 2%, with global benchmark BRENT crude, hovering below USD 80/barrel, but little changed in the week as investors reduced expectations of demand growth from the largest oil importer, China. Brent fell 1.7%, to settle at USD 79.68/barrel and US WTI crude fell 1.9%, to USD 76.65. GOLD spot prices surged to an all-time high, up more than 2% at USD 2507.28/ ounce currently.
Corporate News
APLN: Moody’s Raises Rating, Here’s APLN Management’s Response
Agung Podomoro Land (APLN) has successfully paid off all loans denominated in United States dollars (USD). This condition immediately received a positive response from Moody’s Rating. The global debt rating agency, raised APLN’s Corporate Family Rating (CFR) by 2 notches from Caa3 to Caa1. Furthermore, Moodys revised the outlook to stable from negative. The rating jump from Moody’s reflects the declining refinancing risk for APLN. “We positively welcome Moody’s Rating’s decision to upgrade APLN’s debt rating. This rating increase shows the repayment of USD debt, and the loan management strategy carried out in a prudent, disciplined and measured manner has had a positive impact on APLN’s projected performance going forward,” explained Justini Omas, Corporate Secretary of APLN. In the first semester of 2024 APLN has repaid all Senior Notes loans owned by its subsidiary in Singapore, APL Realty Holdings Pte.Ltd., worth USD300 million. On June 3, 2024, APLN paid the remaining loan of USD131.96 million. (Emiten News)
Domestic Issue
Foreign Investors are Likely to Invade SUN
The Fed’s increasingly strong interest rate cut signal is projected to be a positive catalyst for foreigners to increase their investment in Government Bonds (SUN). Fixed Income Analyst of PT Pemeringkat Efek Indonesia (Pefindo) Ahmad Nasrudin assessed that foreign investors have the potential to increase inflows into the bond market in line with favorable macroeconomic conditions. “The potential for foreign inflows is quite large, mainly driven by interest rate cuts and SUN yields that are still attractive, as well as Indonesia’s stable sovereign rating,” he explained to Investor Daily, Sunday (18/8/2024). In addition, he continued, investors are also interested in foreign investment options which are now increasingly diverse with the presence of Bank Indonesia Rupiah Securities (SRBI) which offer higher yields than SUN. “With a more attractive yield, SRBI can be an option for foreign investors who are looking for greater profit opportunities,” he said. Furthermore, Ahmad said, regarding the prospect of SUN prices next week, it will move sideways with limited movement. That is because prices have been discounted quite heavily during August, so the room for further decline is limited. “However, yields still have the potential to fall due to expectations of interest rate cuts and strong foreign capital flows,” he said. Since July, government bond yields have declined from around 7% to 6.721%. This decline was triggered by expectations of the Fed’s monetary policy easing which weakened the US dollar and increased the attractiveness of emerging market assets such as Indonesia. (Investor Daily)
Recommendation
US10YT rebounded exactly from the 3.82% – 3.78% yield support area and now appears to be trying to break back above the first Resistance: MA10 / yield 3.91%. Based on this movement, US10YT appears to be trying to return to the psychological level of 4.0%, or maybe up to 4.07% but be aware that the yield is moving in a downtrend pattern. ADVISE: anticipate limited downside potential on the price.
ID10YT one last tolerance of the last condition of the yield that continues to go down the downtrend channel is at the yield support of 6.70% (especially when the RSI indicator is getting Oversold); which if it should break also then it will certainly bring the yield to the next support at 6.60% – 6.50%.
Download full report HERE.
