Today’s Outlook:
US MARKETS: The US administration seems to be considering expanding the ban on companies exporting chip-making equipment to China, Bloomberg Businessweek reported on Tuesday; dragging down the Philadelphia SE Semiconductor index by 6.8%, which is the biggest daily decline since March 2020. In addition to Biden, Donald Trump also raised geopolitical tensions by stating that Taiwan should pay the US for supplying defense equipment because Taiwan “gives the US nothing,” causing Taiwan Semiconductor Manufacturing, Taiwan’s largest stock and the world’s largest chipmaker, to fall nearly 8%. While Q2 earnings season continues to color the stock market turmoil, Fed officials signaled an interest rate cut is getting closer as Federal Reserve Governor Christopher Waller stated on Wednesday, as recent data showed more moderate economic growth and easing inflationary pressures.
ECONOMIC INDICATORS: US Housing Starts & Building Permits data rose unexpectedly; while Industrial Production in June also increased double above expectations. The Federal Reserve also released the Beige Book which describes US economic activity running at a moderate pace from late May to early July, amid indications that the labor market is starting to weaken, in line with soft landing symptoms. Currently, financial markets are almost 100% price-in the probability that the Fed will hold a rate cut in Sept, as quoted from CME Fed Watch.
ASIA & EUROPE MARKETS: . Taiwan & China’s relationship is a sensitive topic, as China continues to call for reunification with Taiwan; while the US is Taiwan’s largest arms supplier even though they have no official diplomatic agreement. As is well known, Donald Trump was famous for his trade war moves against China during his presidency in 2010. News from home: INDONESIA held its interest rate at 6.25% at BI’s RDG yesterday. Speaking of interest rates, it’s the ECB’s turn today to make a rate decision which the public expects will also be held at 4.25%. EUROZONE reported CPI (June) at the estimated 2.5% yoy, slightly down from 2.6% in May; while UK CPI (June) still could not be lower than 2.0% yoy which is the central bank’s target.
COMMODITIES: GOLD prices rose to record highs in Asian trading on Wednesday, extending recent strong gains amid growing optimism that the Federal Reserve will cut interest rates in September. Spot gold prices rose 0.2% to a record high of USD 2,478.65/ ounce, while gold futures expiring in August hit a record high of USD 2,483.65/ounce. The DOLLAR INDEX slumped to month lows amid prospects of interest rate cuts, further benefiting precious metals prices. Other precious metals also rose following the weakening dollar, with PLATINUM futures up 0.1%, while SILVER futures 0.3%. OIL prices rose around 2% on Wednesday thanks to a larger than-expected drop in US crude weekly stocks, plus a weaker US
DOLLAR, while signs of lower economic growth in China remained a dark cloud looming. BRENT futures rose 1.6%, to USD 85.08/ barrel, while US WTI advanced 2.6%, to USD 82.85. The weakening of the US Dollar due to the increasingly feasible prospect of a Fed rate cut, is expected to increase interest in buying crude oil from non-US countries.
Corporate News
TRIM: Trimegah Sekuritas (TRIM) Repays IDR 100 Billion Phase I Bonds Series A
PT Trimegah Sekuritas Indonesia Tbk (TRIM) has paid off its Bonds I Phase I Year 2023 Series A totaling IDR 100 billion. The bond repayment was carried out on July 16, 2024 with a period of 370 Calendar Days from the Issue Date. The Company’s Phase I Bonds I Series A were issued on July 6, 2023 with a principal amount of IDR 100 billion with a fixed interest rate of 6.75 percent. For information, the bonds are part of the Sustainable Public Offering of Sustainable Bonds I with a target fund of IDR 1.1 trillion. In the Phase I bond issuance with a principal amount of IDR 358.8 billion, TRIM offered bonds in 2 series. The principal amount for series A is IDR 100 billion with a coupon of 6.75 perseen per year and series B is IDR 308.8 billion with a coupon of 9.25 per year. (IDX Channel)
Domestic Issue
BI Board of Governors Decides to Keep BI Rate at 6.25%
The Board of Governors of Bank Indonesia decided to maintain the BI Rate at 6.25%. Meanwhile, the Deposit Facility rate was also maintained at 5.50% and the Lending Facility rate was maintained at 7.00%. “The Bank Indonesia Board of Governors Meeting (RDG) on July 16-17, 2024 decided to maintain the BI Rate at 6.25%,” BI Governor Perry Warjiyo said in a press conference at the BI office, Jakarta, Wednesday, (17/7/2024). Perry said this decision is consistent with pro-stability monetary policy as a pre-emptive and forward looking step to ensure inflation remains under control within the target of 2.5±1% in 2024 and 2025. Perry said short-term monetary policy will be directed to strengthen the effectiveness of Rupiah exchange rate stabilization and attract foreign capital inflows. Meanwhile, he said, macroprudential and payment system policies remain pro-growth to support sustainable economic growth. “Loose macroprudential policies continue to be pursued to encourage bank credit or financing to businesses and households,” he said. Perry said the payment system policy was directed at strengthening the reliability of the infrastructure and structure of the payment system industry, as well as expanding the acceptance of payment system digitization. (CNBC Indonesia)
Recommendation
A Doji candle appears in the Support area on the US10YT chart, while the RSI shows a positive divergence; signaling the potential for an immediate technical rebound in yield (= limited upside potential in price). The first resistance that it will try to break is MA10 / yield 4.23%, followed by 4.286% / 4.35% from MA20 & MA50.
As expected, ID10YT continues yield consolidation towards 6.84% / 6.76% – 6.74%. Resistance: yield 7.0% psychological level. POTENTIAL: potential for price to strengthen temporarily.
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