Today’s Outlook:
All three major Wall Street indexes closed in negative territory on Tuesday (08/08/23) with the Nasdaq leading the way down 0.79% after credit rating agency Moody’s downgraded 10 small-medium US banks by 1 notch and reviewed 6 giant banks including Bank of New York Mellon, US Bancorp, State Street & Truist Financial for possible rating cuts as well. This has again raised concerns over the health of the US banking sector and the US economy as a whole. Moody’s also warned that the strength of the sector will be tested by credit risk and weak profitability. Market confidence in US banks is gradually returning after the failure of three banks in March, including Silicon Valley Bank, which shook the US & global financial system. The S&P 500 Banks Index has slipped 2.5% this year, compared to the S&P 500’s 17.2% gain, and this downgrading shows the fragility of investor confidence in financial stocks. After a five-month rally pushed the benchmark S&P 500 and Nasdaq Composite to within 5% of their historic highs, August has now recorded five losing sessions out of six. The S&P is down 2% this month, and the Nasdaq has slumped 3.2%. Reaction to the bank downgrades pushed up the CBOE Market Volatility index, Wall Street’s fear gauge, at one point hitting a two-month high.
China’s Trade Balance came out disappointing, where it reported a Trade Balance (July) surplus of USD 80.6 billion, indeed exceeding expectations and the previous month’s position of around USD 70.6 billion; but recording a larger than expected decline in Exports & Imports. It is known that crude oil Imports into China (which is the world’s second largest importer and consumer of oil) plummeted 18.8% below June’s figure; although it has risen 17% from the lows of a year ago. Speaking of Trade Balance, the US also released Trade Balance (June) data with a deficit of USD 65.5 billion, more or less in line with expectations and naturally a lower deficit than the previous month as US Exports did not change much while the decline in Imports was larger.
From Europe, Germany reported July Inflation figures which came in at the expected 6.2%, finally lower than June’s 6.4%. From the other side of the world, after South Korea and Japan recorded above expected Current Account (June) growth and Japanese household spending in June tripled on a monthly basis, this morning saw Korea’s Unemployment Rate rise to 2.8% in July. Soon market participants will monitor the release of China’s Inflation data for July, which is haunted by a potential deflation of 0.4% on an annualized basis, although on a monthly basis is expected to rise at least 0.1%.
Indonesia also announced its Consumer Confidence Index (July) at 123.5, (the lowest level in 4 months); down from June at 127.1. This index indicates that consumer confidence in Indonesia’s economic conditions in July remained strong, driven by the Current Economic Conditions Index (CECI) and Consumer Expectations Index (CEI) which remained in the optimistic zone (>100) although recorded lower than June. In July 2023, consumer confidence was observed to remain optimistic across all expenditure categories with the highest optimism recorded among respondents with expenditure of more than IDR 5 million. Based on age, consumer confidence in July 2023 was also observed to be optimistic across all age categories of respondents, although the survey showed that the older the respondent, the lower the level of confidence.
Corporate News
Indosat (ISAT) Ready to Repay Maturing Bonds IDR 155 Billion Telecommunications issuer, PT Indosat Tbk (ISAT) is preparing to pay off bonds maturing on September 2, 2023 amounting to IDR 115 billion. As a reminder, Indosat Phase IV 2016 Sustainable Bonds I Series D was officially offered on September 5, 2016. The bonds have a coupon rate (Fixed) of 9 percent per year. (Bisnis)
Domestic Issue
Bond Issuance Reaches IDR 74.10 Trillion The Indonesia Stock Exchange (IDX) noted that the total bond and sukuk emissions that have been recorded throughout 2023 are 65 emissions from 47 issuers worth IDR 74.10 trillion. The information was conveyed by the company in a press release in Jakarta, yesterday. With this record, the total bond and sukuk emissions listed on the IDX amounted to 527 emissions with an outstanding nominal value of IDR 463.57 trillion and USD 47.5 million, issued by 128 issuers. While Government Securities (SBN) listed on the IDX amounted to 191 series worth IDR 5,536.74 trillion and USD 486.11 million. EBA as much as 9 emissions worth IDR 3.15 trillion. (Neraca)
Recommendation
US10YT’s uptrend is relatively intact but the yield has broken below the first Support/MA10; making the yield of 4.042% the nearest Resistance at the moment. If there is a possibility that US10YT should test the following Support, it will lead to MA20 at a yield of 3.947%. ADVISE: HOLD; Wait & See. ID10YT reached upper channel Resistance and previous High level around 6.369% yield. The TARGET of the upper channel Resistance is still on wait at 6.425% yield, but there is a slight possibility of a short pullback as RSI is approaching the Overbought region could be a reason to consolidate for a while here. ADVISE: get ready to Sell on Strength, or set your Trailing Stop.
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