Today’s Outlook:
The US stock market closed lower on Wednesday (09/08/23) with the Nasdaq leading the decline by 1.2%, a day after data showed that Americans’ credit card transactions last quarter were at an all-time high; as well as a day ahead of the US Inflation announcement which will heavily influence the Federal Reserve’s interest rate decision. The Federal Reserve Bank of New York said US credit card debt surpassed USD 1 trillion; on the other hand, Philadelphia Fed President Patrick Harker said the US central bank may be in a position to keep interest rates at current levels, at the September FOMC Meeting. Market participants are pricing in a probability of 86.5%, according to the CME FedWatch Tool. US CPI for July, due later on Thursday night at around 19:30 GMT, is expected to show a slight acceleration from a year ago, at a rate of 3.3% yoy. On a monthly basis, consumer prices are predicted to increase by 0.2%, the same as in June. Core CPI (July) which is also a concern is expected to tame slightly to 4.7% yoy, from 4.8% in June. In addition to Inflation data, Initial Jobless Claims will be highly highlighted by market participants with predictions coming out at 230K, slightly stronger than the previous week at 227K. Speaking of CPI in Asia, China experienced deflation in July. The consumer price index fell in the world’s second-largest economy, said the National Bureau of Statistics, the first decline since February 2021. China’s CPI came in at -0.3% yoy in July, further weakening from June’s already zero percent position; although on a monthly basis, there was a slight improvement to 0.2% from minus 0.2% in the previous month (the first positive growth in 6 months). Japan this morning reported July producer-level inflation (PPI) at 3.6% yoy, slightly higher than expected. Domestically, Indonesia reported stronger Retail Sales in June at 7.9% compared to the previous month at – 4.5%. However, this has not been able to boost motorcycle sales as the latest growth stands at 45.6%, the lowest position in the last 3 months.
Corporate News
Low Tenancy Ratio Limits MTEL’s Debt Rating PT Dayamitra Telekomunikasi Tbk (IDX: MTEL) will increase debt worth IDR 1 trillion through the issuance of short term debt securities or Medium Term Note (MTN). This was revealed from the rating results by Pefindo uploaded on the Indonesia Stock Exchange (IDX) website, Tuesday (8/8/2023). Interestingly, Pefindo pinned an idAAA rating on the company and the MTN issuance plan. MTEL’s rating with a period of 2 August 2023 – 1 August 2024 can be limited by a low tower rental or tenancy ratio. The rating can even be downgraded if revenue or EBITDA is significantly lower than targeted, or if the company’s debt position increases higher than projected without being compensated by a greater increase in revenue. (Pasar dana)
Domestic Issue
Investor Interest in Corporate Bonds is Still Maintained The potential uptake of corporate bonds is still considered positive despite the emergence of the sentiment of default by several BUMN Karya. Corporate bond ownership in a number of groups was also recorded to have increased. Pefindo Fixed Income Analyst Ahmad Nasrudin said investment interest in the corporate bond market is driven by the need to get higher returns than government bonds but with a tolerable level of risk. This investor interest is also reflected in changes to the bond ownership during January-July 2023. During the period, Pefindo noted that several investors increased their ownership in the corporate bond market. On the other hand, Ahmad believes that the default of BUMN Karya may affect investors’ tastes and preferences in investing in corporate bonds. He estimates that investors will be more cautious in allocating investments. Apart from looking at ratings, investors also diversify based on sectors to reduce risk exposure. (Bisnis)
Recommendation
US10YT is quite stable in the upward channel pattern even though the yield is still below the MA10; making the yield of 4.053% the nearest Resistance at the moment. If there is a possibility that US10YT should test the following Support, it will aim for the MA20 at a yield of 3.958%. ADVISE: HOLD; Wait & See.
ID10YT finally reached the mid-term upper channel (downtrend) Resistance, the Trendline pull from October last year and stopped right at the High yield level of 6.263%; when RSI also entered Overbought territory. ADVISE: Sell on Strength, or set your Trailing Stop.
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