Fitch: Foreign Exchange Reserves Support Samurai Bond Ratings. Fitch Rating sets the final BBB rating for Indonesian Samurai Bonds worth 100 billion yen issued early July 2020. This stipulation replaces the expectations of BBB(EXP), and is in line with Indonesia’s long-term foreign currency ratings from BBB with a stable outlook. In addition to increased foreign exchange reserves, reduced dependence on commodity price volatility and rising government revenue ratios are other factors supporting credit ratings. Yesterday, the SUN market also responded positively to Indonesia’s trade balance which returned to a surplus, indicating the start of manufacturing activity in a number of Indonesian trading partners. Yesterday, prices of all the reference series closed higher with FR0082, FR0080, and FR0083 moving towards par level. The market movement of Sovereign Debt Instruments (SUN) was also amidst expectations of Bank Indonesia (BI), which again cut the benchmark seven-day reverse repo rate (BI 7-DRRR) by 25 bps to 4%.

GIAA and KRAS Issue IDR 11.5 Trillion MCB. Ministry of State Owned Enterprises (BUMN) provides bailout funds to Garuda Indonesia Tbk (GIAA IJ) and Krakatau Steel Tbk (KRAS IJ) in the form of mandatory convertible bonds / MCB). In this MCB scheme bailout, Garuda Indonesia will get funds worth IDR 8.5 trillion and Krakatau Steel IDR 3 trillion. The distribution of these funds is in the context of the national economic recovery program (PEN) in the form of investment, because the company is not 100% owned by the government. Meanwhile, the placement of government investment funds has been regulated in Law No. 2 of 2020 and PP 63 of 2019 concerning government investment. (CNBC Indonesia)

1H20 Trade Balance Surplus of USD 5.50 Billion. The Central Statistics Agency (BPS) recorded a trade balance during the first half of 2020 surplus of USD 5.50 billion. This figure is better than the same period the previous year which recorded a deficit of USD 1.87 billion. This positive signal of rising imports is supported by the June 2020 trade balance which has a surplus of USD 1.27 billion. This indicates the start of a number of global manufacturing activities, after almost all of Indonesia’s trading partner countries are still under indication of expansion. Meanwhile, exports for the June 2020 period were valued at USD 12.03 billion, up 15.09% MoM or up 2.28% YoY. This increase was due to an increase in the value of oil and gas (oil and gas) and non-oil and gas exports. On the other hand, imports for the June 2020 period were valued at USD 10.76 billion, up 27.56% MoM or down 6.36% YoY. (BPS, NHKSI Research)

Investors Watch for Singapore Recession. Market players continue to watch for news of Singapore’s recession, which will raise concerns over investment risks in emerging markets, especially Indonesia. Investors are also waiting for the release of the BI 7-DRRR benchmark interest rate data at the BI Board of Governors’ Meeting at 14.20 WIB today. Based on a Bloomberg survey, BI still has room to cut interest rates 25 bps to 4%. In yesterday’s trade, the rupiah weakened 0.95% to a level of IDR 14,588/USD on the spot market. While the BI middle rate weakened 0.72% to IDR 14,616/USD. In the short term, investors can watch FR0082, FR0080, and FR0083 which have the tendency of prices to move to par level.

-REVIEW (July 15, 2020)-
FR0081 (5yr): -0.9 Bps to 100.85 (6.29%)
FR0082 (10yr): -1.5 Bps to 99.67 (7.04%)
FR0080 (15yr): -2.4 Bps to 99.86 (7.51%)
FR0083 (20yr): -1.4 Bps to 99.50 (7.54%)

UST 2yr: -0.003 point to 0.15%
UST 5yr: -0.001 point to 0.28%
UST 10yr: +0.007 point to 0.63%
UST 30yr: +0.021 point to 1.33%
German Bund 10yr: +0.002 point to -0.44%
UK Gilt 10yr: +0.017 point to 0.16%

CDS 2yr: -2.92% to 51.42
CDS 5yr: -1.26% to 125.44
CDS 10yr: -2.31% to 193.92

WTI: +2.25% to USD41.20/Barrel
BRENT: +2.07% to USD43.79/Barrel