Wall Street’s Three Major Indexes Advanced Solidly

Today’s Outlook:
Wall Street’s three major indexes advanced solidly on Friday, (30/06/23), with the Nasdaq technology index leading a 1.45% gain while bagging a semi-annual gain of more than 31% (the largest in 40 years) as US Inflation data proved tame; prompting Apple stock breached the USD 3 trillion mark for the first time in history. Even the Nasdaq 100 index of top technology stocks boasted its biggest first half gain on record, adding around 39%. However, this was not the case for Indonesia which only had two trading days last week, during the first half of 2023 it posted a -2.75% decline. For the past 6 months, JCI has been moving sideways between the Support Resistance range: 6550-6950.

Regional market investors were seen in excitement on the last trading day of the second quarter of the year amid signs of cooling US inflation due to the Federal Reserve’s tight monetary policy measures. The Commerce Department report showed the May Personal Consumption Expenditures (PCE) index rose just 3.8% compared to 4.3% in April. While the core PCE index (excluding volatile food and energy) rose 0.3%; down from 0.4% in the previous month. The data fueled hopes that the Fed could be nearing the end of its rate hike cycle, which immediately resulted in lower Treasury yields as a market response to taming inflation. Traders were pricing in an 84.3% chance (down slightly from the previous probability at 89.3%) that the Fed will hike rates by 25 bps to 5.25%-5.50% range in its July meeting, according to CMEGroup’s Fedwatch tool. Although hawkish remarks from Fed Chair Jerome Powell and strong economic data earlier this week boosted bets the Fed would keep hiking rates, but stock markets took comfort in signs of strength in the U.S. economy as inflation cooled.

The S&P500 is currently at a P/E ratio of 19.1x, above the historical average P/E of 15.6x, as quoted by Refinitiv Datastream. The stock market has so far been able to thrive amidst the high interest rate policy trend that could change if bond yields continue to rise. Benchmark bond yields recently hit a 3-month high, with the 10-year US Treasury yield hovering around 3.8%, more than the recorded figure at the end of 2021. Rising yields usually dilute the attractiveness of stocks relative to bonds, but in recent months, equity valuations have been steadily rising. UBS Global Wealth Management analysts recently said that the likelihood of a recession depends most on monetary policy tightening, allowing stocks to become less valued. As stock prices approach the ideal conditions of a soft landing scenario, fund managers see more attractive risk-reward ratios in high-quality bond investments than equity.

Corporate News
MNC Kapital (BCAP) Owned by Hary Tanoesoedibjo Officially Recorded IDR 300 Billion Bonds MNC Kapital Indonesia Phase II 2023 Sustainable Bonds III issued by PT MNC Kapital Indonesia Tbk. (BCAP) owned by entrepreneur Hary Tanoesoedibjo is officially listed on the Indonesia Stock Exchange (IDX) starting today, Monday (3/7/2023). The bonds with a nominal value of IDR 300 billion consist of two series. The first series is Series A (BCAP03ACN2) with a nominal value of IDR 216.44 billion with an interest rate of 10.75% and a period of 370 days from issuance. Furthermore, Series B (BCAP03BCN2) with a nominal value of IDR 83.55 billion and an interest rate of 11.25% with a period of 3 years from issuance. Based on information disclosure, the bonds issued by BCAP this time received a rating of idBBB + (Triple B plus) from PT Pemeringkat Efek Indonesia (Pefindo). (Bisnis)

Domestic Issue
Just a Day of Being Offered, ORI023 Has Sold IDR 983.96 Billion Retail Government Securities (SBN) type ORI023 has just been offered for the first time on Friday (30/6/2023) yesterday. In the initial offering, ORI023 has sold a total of IDR 983.96 billion. Based on information from one of the distribution partners, the 3-year tenor ORI023 (ORI023-T3) has sold as much as IDR 619.46 billion of the government’s target of IDR 10 trillion. Thus ORI023T3 has absorbed 6.19% of the target. As a result, the quota that can still be purchased is IDR 9.38 trillion. Meanwhile, the 6-year tenor ORI023 (ORI023T6) has sold 3.64% of the target. ORI023T6 sold as much as IDR 364.50 billion, so the available quota is IDR 9.63 trillion. Overall, the ORI023 series sold 5% or IDR 983.96 billion of the overall target of both tenors of IDR 20 trillion in one day of bidding. (Bisnis)

Recommendation
US10YT is slowly breaking the Resistance from the previous High level in the Sideways pattern this past month, it will be more stable if the benchmark yield can exceed the 3.86% level; it will open the way to the TARGET around the 3.97% – 4.0% yield. ADVISE: Gradual Average Up.

ID10YT is still slumped in a downtrend channel pattern while still below MA10 & MA20, making the yield level of 6.303% – 6.328% the closest Resistance at the  moment. A break above this level will open up opportunities for strengthening to the following TARGET / Resistance, namely MA50 / 6.428% and then followed by the TARGET of the pattern, namely 6.471% – 6.478%. ADVISE: HOLD ; Average Up accordingly.

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