Today’s Outlook:
US stocks closed in positive territory on Monday (17/07/23) on expectations corporate earnings will exceed forecasts, but global shares and the dollar traded little changed after data showed the Chinese economy grew slower than anticipated. China overnight reported growth of 0.8% in the second quarter, above the 0.5% forecast, but the annual pace was 6.3%, well below expectations for a reading of 7.3%. From the beginning of the year, China’s GDP has grown by 5.5% yoy in these two running quarters. Apart from Industrial Production (June), none of China’s other macroeconomic data managed to surpass the previous period’s performance. Analysts think the post-COVID economic boom is over and China’s economic situation has lost its momentum.
However, fears earlier in the year of a US hard landing have lessened as slower consumer inflation has brightened the outlook on Wall Street as companies begin to report second-quarter results, which are expected to fall 8.1% (according to Refinitiv data), down further from the 5.7% decline expected at the beginning of the month. On the other hand, Inflation is still above the Federal Reserve’s target of 2%. Most market participants expect a 25bps rate hike by the Federal Reserve at next week’s meeting, with a 97.3% probability, according to the CME Group FedWatch Tool. Futures are pricing in an additional 32 basis points of tightening this year, with the benchmark rate expected to peak at 5.40% in November. That implies the market sees a low chance of further rate hikes after the Fed concludes a two-day meeting on July 25-26. Analysts expect only limited upside potential for US stocks which are already highly valued; in fact, the S&P500 is now trading at a forward P/E of 19.7x. Speaking of other economic data, the announcement of Retail Sales (June), Industrial Production (June), and Business Inventories (May) on Tuesday evening WIB will be in the spotlight for market participants today, although the data may have little bearing on monetary policy or market direction.
Indonesia reported a Trade Balance surplus (June) that surged unexpectedly to USD3.46 billion, more than double the estimate, and much higher than May’s USD440mn; at a time when Export & Import growth actually plummeted compared to June 2022, at -21.18% yoy and -18.35% yoy respectively. But fortunately, compared to May 2023, Imports fell more by 19.4% than Exports which only fell by 5.08%; so Indonesia’s Trade Balance in June 2023 was able to book 38 consecutive months of surplus mainly from the non-oil & gas sector of USD4.41 billion, but was reduced by a deficit in the oil & gas sector worth USD0.96 billion.
The Dollar Index fell 0.064%, but the Euro rose 0.08% to USD 1.1236/Euro. US Treasury yields fell sharply last week as slowing consumer and producer price inflation in June raised expectations that price pressures will continue to tame and lead to a more dovish monetary policy. The 2-year US Treasury yield, which typically moves in line with interest rate expectations, fell 0.9 bps to 4.742%, while the benchmark 10-year bond yield fell 1.5 bps to 3.805%. World Gold prices were little changed, as Gold traders are still uncertain about whether the Fed will soon signal an end to its tight monetary policy. Gold price futures moved down 0.4% to USD1,956.40 per ounce.
Corporate News
Indomobil Finance (IMFI) Bonds Maturing Today, Customer Installments Becomes a Source of Repayment PT Indomobil Finance Indonesia (IMFI) has bonds that will mature on Tuesday today (07/18/2023). Indomobil Finance Sustainable Bond V with Fixed Interest Rate Phase I Year 2022 Series A has an emission value of IDR 500 billion. Indomobil Finance Executive Board Gunawan Effendi said that his party has prepared funds to pay off the maturing bonds. Gunawan said that the funds come from debtor collections/installments received and also credit facilities owned. (Bisnis)
Domestic Issue
Bond Issuance Prospects for Semester II/2023, Which are the Most Favo Red? Bond issuance is expected to increase in the second semester of 2023. The rise in bond issuance until the end of 2023 was triggered by the bright prospects for bonds in the second half of this year. Head of Fixed Income Fikri Syuhada assesses that people who are interested in investing directly tend to prefer government bond products. The high public interest in government bonds can be seen from the increasing issuance of Retail Government Bonds (ORI) over the past few years. Similarly, Pinnacle C EO Guntur Putra confirmed that the selection of maturity time is one of the things that must be considered by investors. Guntur believes that shorter tenor series will be more suitable for investors who seek liquidity and protection from interest rate changes. Meanwhile, for investors who are aiming for high er return offers, then they are suitable to choose a longer tenor series. (Bisnis)
Recommendation
US10YT is trying to resist in the Support lower channel (Uptrend) but needs more struggle to break M A20 & M A10 Resistance in the range of: 3.851-3.897%. ADVISE: Speculative Buy; or Average Up gradually. TARGET: 4.0% / 4.091%. ID10YT has proven unable to break out of the downtrend channel; yesterday’s high yield of 6.277% stopped exactly at the upper channel resistance, but at least it has managed to surpass MA10 & MA20 at once ( making the level of 6.261-6.223% then earnest yield support at this time. ADVISE: Average Up accordingly after breaking this down channel. TARG ET: MA50 at 6.343% yield; followed by Target pattern at 6.398 -6.40%.
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