Quadruple Witching Ignores Fundamentals. Wall Street closed mixed, with May’s US Industrial Production data significantly lower (Act. 0.2% Vs. Apr. 1.4%). The latest indication of slowing economic activity complements May’s monthly retail sales data (-0.3%) and new housing (-14.4%) which contracted, as high inflation restrained public consumption. Wall Street’s volatility at the weekend relatively ignored fundamental and technical factors, amid Quadruple Witching phenomenon, the traders’ attempts to close positions, ahead of the expiration of stock index futures, single-stock futures, stock options and stock index options contracts.
Narrowing Differential Interest Rate. Investors are starting to observe the impact of the BI and the Fed interest rate disparity, which has narrowed to 175-200 bps. The past week, the JCI weakened more than 2%, with a net foreign sell of IDR 1.4 trillion, and the depreciation of the rupiah to IDR 14,800. Rupiah depreciation was in line with the pressure on the SBN market, with the yield on the benchmark 10Y FR91 SUN jumping 15 bps after the significant 75 bps hike in the FFR. Over the weekend, all sectors weakened except for health care, amid a number of current health issues. NHKSI Research projects JCI to move upward (rebound) in the range of 6.850-7.150.
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