Today’s Outlook:
Major US stock indexes ended solidly in positive territory on Wednesday (12/07/23), led by a gain of more than 1% in the Nasdaq after a report showed inflation subsided further, resulting the June CPI registering their slowest pace for 2 years or since March 2021. On a monthly basis, US CPI (June) rose 0.2% after growing 0.1% in May, but running at 3% YoY on an annual basis, lower than May’s 4%. The data underscored expectations the Federal Reserve may let interest rate stand after one more 25 bps hike expected at its July FOMC Meeting. However, what remains to be considered is the position of Core CPI (June), which is still at 4.8% YoY (although managed to cool down from May at 5.3%); but still twice as high as the Federal Reserve’s 2% target. This will certainly still be a matter of debate going forward regarding the Fed’s continued tight monetary policy. Another sentiment that moved the market was the S&P 500 banks index, which crept up 0.6%; where traders are looking forward to the release of performance reports from major banks, such as JPMorgan Chase on Friday which will kick off the 2Q23 earnings season. Investors also digesting US Treasury Secretary Janet Yellen’s trip to China, which raised Beijing’s hopes that tariffs on imported Chiense goods could be reduced. Later tonight the US will again take the attention of the market, where the weekly Initial Jobless Claims and PPI (June) data will again be in the spotlight.
On the other hand, the Dollar dropped to its lowest point in over a year and US Treasuries plummeted on the back of the release of US Inflation data that has cooled. The Dollar Index dropped to 100.54, the lowest since April 2022, and was last down 1% at 100.55, on track for its biggest daily percentage loss since early February.
From the world’s east, South Korea reported Unemployment Rate (June) growing at 2.6% (vs 2.5% on May). This morning they also reported the Export & Import Price Index (June) which dropped further below estimates. Later today South Korea’s central bank will make a decision on interest rates which are expected to remain flat at 3.5%. Meanwhile, Japan reported Core Machine Orders (May) which fell sharply unexpectedly on both an annual and monthly basis. Not surprisingly, their PPI (June) figure also failed to meet expectations, and there was still deflation on a monthly basis of 0.2% MoM (Following -0.7% in May). Indonesia also reported significantly weaker Retail Sales (May) which grew by minus 4.5% YoY, compared to April’s positive 1.5%. The aura of economic slowdown seems to be getting more noticeable on the Asian continent. The highlight will be China’s Export & Imports figures (June) where exports are expected to start increasing to 0.5% YoY, while imports are predicted to slow even further at -6.1% YoY. Overall, the data will conclude China’s Trade Balance which is expected to increase its coffers to USD93.9 billion, growing from the previous month at USD65.81 billion. Meanwhile, from Europe, the UK will report GDP (May) where monthly growth is expected to be at minus 0.4% compared to 0.2% in April. The negative growth situation has also been predicted to haunt the UK Industrial & Manufacturing Production in May which is reported later this afternoon, along with Trade Balance (May). French CPI (June) follows later where they hope to tame Inflation to 4.5% YoY from 5.1% in May.
Corporate News
Releasing IDR 350 M Bonds, Pefindo Rates Arkora Hydro (ARKO) idA (pg). PEFINDO assigned an idA (pg) rating to the planned Environmental Bonds I Year 2023 of PT Arkora Hydro Tbk (ARKO) with a maximum value of IDR 350 billion. The proceeds will be used for debt refinancing. The debt instrument is partially guaranteed by PT Indonesia Infrastructure Finance (IIFF, idAAA/Stable) covering the principal value of the Bonds on a prorated basis of at least 75%, quarterly coupon payments of at least 200%, and late bond coupon payments and/or penalty fees of at least IDR 7.0 billion. (Emiten News)
Domestic Issue
Bonds Considered Most Favorable Instrument in Political Year. PT Bursa Efek Indonesia Business Development Advisor Poltak Hotradero said Indonesia’s economic growth from year to year when he was a speaker at the Investor Gathering 2023. Poltak predicts that entering the political year, Indonesia’s macroeconomy is quite attractive and resilient in the 2023- 2024 period. This is a strong asset because Indonesia has experience. “The most favorable market instrument at the moment is bonds, triggered by the falling inflation rate. It will be even more profitable when there is a decline in interest rates. Generally, this situation is also the beginning of a new bull market in equities,” Poltak said on Wednesday. Meanwhile, PT Bursa Efek Indonesia Economist Adhel Rusd explained that the prospects for the capital market in Indonesia ahead of the political year are very good. In addition, he added, the lifting of the pandemic status has encouraged consumption levels to recover, so that purchasing power is maintained. (Tribune)
Recommendation
US10YT apparently broke its closest Support which is MA10, making the yield level of 3.926% the closest resistance at the moment. US10YT relies on the second Support which is MA20 / 3.844% which if unable to hold, will send the yield to the next Support level which is MA50 / 3.77-3.74%. ADVISE: Buy on Weakness. ID10YT yield has not confirmed to break this downtrend channel. Yield needs to close steadily above the upper channel resistance in the range of : 6.294%. ADVISE: Average Up accordingly. TARGET : MA50 / yield 6.363%, followed by 6.438% / 6.478%.
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