Today’s Outlook:
• The S&P500 closed at a fresh record level of 5178.48 on Tuesday (19/03/24) while the DJIA led the gainers by gaining 0.8%, supported by Energy stocks and weakness in US Treasury yields as investors await the Federal Reserve’s decision later today (around 0100AM on Thursday). Considering the latest US Inflation rate is still above the Fed’s 2% target, the latest US economic projections suggest that there may not be as many as 3x Fed rate cuts as previously thought. However, US Treasury yields still slipped, with the 2-year yield falling 4bps to 4.69%. In terms of economic data, the property sector activity improved as evidenced by the Housing Starts & Building Permits figures which improved further in February.
• ASIA MARKETS: BANK OF JAPAN took a historical step by ending the negative interest rate trend after 8 years, and finally raised interest rates for the first time in 17 years, where now BOJ interest rates appreciated to 0.1% from -0.1% previously. The Japanese central bank also abolished its yield curve control policy. The purpose of this action was to increase bank liquidity and encourage banks to lend more eagerly, in order to increase public spending and combat deflation. Japan’s major corporations have just approved the highest wage increases in 33 years. Higher wages allow people to spend more. In addition to income, the Japanese government also hopes that investment will grow to support their economy, as Industrial Production (Jan) contracted 6.7% in Jan, into negative growth territory from 1.2% in the previous period; and of course not forgetting that Japan was plunged into a technical recession for two quarters in 2023. Today it’s the PEOPLE’S BANK OF CHINA’s turn to set their interest rates which are predicted to be held at 3.95% for the 5Y China Loan Prime Rate, and 3.45% for short-term rates. Later in the afternoon, the BI RDG will follow with the same interest rate decision, where market participants have expected the BI7DRR to be held at 6.0%.
• EUROPEAN MARKETS: the ZEW Economic Sentiment indicator showed significant optimism towards the economic situation in the next 6 months in Germany and the Eurozone. A myriad of more buzzing economic data will come from the UK which will primarily release Inflation figures (Feb) which are forecast to flatten to 3.5% yoy, from 4.0% previously. Then following the German PPI which was previously wallowing in deflationary territory of -4.4% in Jan, is forecast to remain unchanged in February as well.
• COMMODITIES: OIL prices climbed to a 4-month high on a second consecutive day of gains after the release of US weekly crude oil stock data by the American Petroleum Institute showed that US crude oil inventories fell by 1.52 million barrels (following a drop of 5.5 million barrels in the previous week), missing forecasts of a 77k barrel build. Later tonight will follow the government’s oil inventory report which forecasts a reduction of 25,000 barrels, following a shrinkage of 1.5 million barrels earlier. Traders are also weighing the impact of Ukraine’s attack on a Russian refinery that may disrupt global fuel supplies. So far Ukraine has intensified their attacks on Russia’s oil infrastructure, with at least 7 Russian refineries attacked by drones this month alone. The attacks have caused plant capacity to drop 7% or around 350k bpd, according to Reuters calculations. Analysts estimate that the scarcity of Russian oil in the global market provides an opportunity for US oil prices to rise by 3%. Previously, oil prices have received support from Saudi Arabia & Iraq’s oil export cuts, as well as signs of economic improvement in China & the US.
• JCI is still relatively safe inside the PARALLEL CHANNEL patterned upward trajectory, where the closest support which is the lower channel is still intact at 7300, even yesterday’s closing at 7350.34 level again secured the position of JCI above MA10 & MA20. The strengthening of JCI yesterday was supported by the inflow of foreign funds amounting to IDR 762 billion, a significant increase from their position the day before which was only IDR 97 billion. Not only that, the Government Securities (SBN) market was also flooded with non-resident funds with net purchases exceeding IDR 3 trillion. Apart from the regional market, today there are also many important events in the country that are very likely to influence market sentiment, such as the announcement of the official election results by the KPU and the interest rate decision from the BI RDG. NHKSI RESEARCH advises investors/traders to maintain more of a WAIT & SEE attitude, while monitoring the market reaction.
Company News
• SMRA: 2023 Profit Hits IDR765 Billion
• NCKL: Working on the Right Issue of 18.92 Billion Shares
• EXCL: Prepare IDR8 Trillion Capex
Domestic & Global News
• DPR and ESDM Ministry to Discuss EBET Bill Next Month
• 50 US Business Delegates Visit Vietnam This Week, From Meta to Boeing
Download full report HERE.
