Today’s Outlook:
Investors are abandoning risky assets as concerns grow about an escalation of CENTRAL EAST CONFLICT after Iran launched several missiles into Israel in retaliation for Israel’s campaign against Iran’s ally Hezbollah in Lebanon. Israel itself said that such a serious attack would inevitably have consequences (relaliation). The escalating tensions in the Middle East began to shake investor confidence, especially regarding the stability of the US stock market, which was already highly valued. The plunge in stocks was followed by the movement of investors to safe-haven assets such as government bonds and the US Dollar.
ECONOMIC INDICATORS:
– JOLTS JOB OPENINGS (Aug) stated that 8.04 million jobs were created in Aug, higher than forecast & previous period which only ranged from 7.64 – 7.71 million. The release of this figure more or less alleviated fears of the US economy falling into recession, but is still overshadowed by the sluggish US Manufacturing sector in Sept where figures from S&P Global and ISM both show the US MANUFACTURING PMI is still far from expansionary levels.
– Tonight the ADP NONFARM EMPLOYMENT CHANGE (Sept) data will be monitored to record labor growth in the private sector with an estimate of 124k jobs created, up from 99k in Aug. COMMODITIES: The escalation of the Middle East conflict boosted OIL prices which jumped 3% on Tuesday; after rising 5% in one session, triggered by concerns of supply disruption in the region. Traders anticipated that crude supply disruption from the Gulf region would push prices sharply higher, a flashback to the previous Russia – Ukraine war.
MARKET SENTIMENT:
– The CBOE VOLATILITY INDEX, an indicator of market “fear” levels, rose to a 3-week high of 20.73, before trimming its gains to stay at 19.25 (still below 20 which does not take into account a massive military scenario). Further market volatility is expected as we approach the November US presidential election.
– ATLANTA FED’S GDP estimate for third quarter US GDP growth was cut to 2.5% from 3.1% last week. This is the largest decline since Q3 tracking estimates were launched in late July. ASIA & EUROPE MARKETS:
– CHINA markets were closed due to the Golden Week holiday, and the main economic data releases were Inflation and Manufacturing PMI data from SOUTH KOREA, as well as Consumer Confidence from JAPAN. Figures from Seoul confirmed South Korea’s CPI fell to 1.6% in September from 2.0% in August. It was the lowest figure, and also the first time below the 2% threshold, since March 2021. This was followed by the S&P Global South Korea Manufacturing PMI figure falling to 48.3, the lowest in over a year (since Aug 2023).
– From the EUROPEAN continent, the Manufacturing PMIs from GERMANY & EUROZONE are still struggling in contraction territory, albeit strengthening slightly above expectations; but clearly losing out against the UK which has been steady at 51.5 (Sept) as predicted. Speaking of Inflation, EUROZONE CPI (Sept) came in at 1.8% yoy (as preliminary estimate) which is in line with forecast and lower than Aug’s 2.2%, thus exceeding the ECB’s Inflation Target of 2%.
INDONESIA : released Nikkei Manufacturing PMI (Sept) figure strengthened to 49.2 from last month’s 48.9, but has not moved into expansion territory. Sept INFLATION was recorded safely contained at 1.84% yoy, down from 2.12% in Aug.
Corporate News
DOID: DOID’s Subsidiary, Bukit Makmur Mandiri Utama Issues Bonds with Interest of up to 9.75%
A subsidiary of PT Delta Dunia Makmur Tbk. (DOID) is eyeing fresh funds from the issuance of bonds worth IDR 1 trillion in the second half of this year by offering an interest rate of 7.25% to 9.75%. In a brief prospectus published on Bisnis Indonesia daily, Tuesday (1/10/2024), PT Bukit Makmur Mandiri Utama (BUMA) conveyed the ongoing public offering of BUMA Bonds II Year 2024 with a maximum principal value of IDR 1 trillion. The bonds will be issued in three series and received an idA+ (Single A Plus) rating from Pefindo. In more detail, Series A is offered with a principal amount of IDR 251.03 billion, a fixed interest rate of 7.25% per annum, and a tenor of 370 days. Series B is offered with a principal amount of IDR 332.71 billion, a fixed interest rate of 9.25% per annum, and a tenor of 3 years. Meanwhile, Series C is offered with a principal amount of IDR 416.25 billion, a fixed interest rate of 9.75% per year, and a 5-year tenor. The funds obtained by BUMA from the bond issuance will be used for refinancing and capital expenditures of the DOID subsidiary. (Bisnis)
Domestic Issue
Auction of 7 Series of Debt Securities, Government Obtains IDR 24 Trillion in Fresh Funds
The Directorate General of Financing and Risk Management (DJPPR) of the Ministry of Finance has carried out an auction of Government Debt Securities (SUN) on Tuesday (1/10/2024). There were 7 debt securities being auctioned. In its official statement, DJPPR stated that the total bids entered in the auction reached IDR 46.649 trillion. Of the entry bids, the government won IDR 24 trillion. The debt securities with the highest bid value were FR0103, whose value reached IDR 14.955 trillion with a nominal amount won of IDR 7.350 trillion. The FR1013 series recorded a weighted average yield won of 6.52975% with the highest yield won being 6.54000%. The coupon rate is 6.75% and will mature on July 15 2035. Meanwhile, FR1014 recorded the highest nominal amount won, namely IDR 8.600 trillion, even though the incoming bid value of IDR 14,130 trillion was still below the FR1013 series. The FR1014 series has a weighted average yield won of 6.23995% with the highest yield won being 6.26000%. The interest coupon is 6.5000% and matures on July 15 2030. (Fund Market)
Recommendation
US10YT tests MA10 & MA20 Support line and upper channel (broken downtrend) at yield range: 3.75% – 3.70%. If this Support test is successful then the yield should rebound back with a TARGET of surpassing MA50 / yield of 3.838% (= a hint to sell more bonds) and accelerate towards a more advanced TARGET: yield 4.0% / 4.30%.
ID10YT has not yet managed to surpass the first Resistance: MA10 / yield 6.463%, however the potential for technical rebound is still lurking and bond price weakness should also be anticipated this week. TARGET / next resistance: MA20 / yield 6.535%, before heading to a higher TARGET: MA50 / yield 6.674%.
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