Today’s Outlook:
Global stock markets were flat, searching for direction with Wall Street set to remain closed on Tuesday for the 4th of July holiday. The markets were looking for clues from economic data announcements. From South Korea, which reported CPI (June) at 2.7% yoy, below expectations and the previous month’s CPI as well. Germany announced a Trade Balance (May) surplus of EUR 14.4 billion, also lower than forecast and previous period. This morning South Korea has reported Foreign Exchange Reserves (June) at USD 421.45 billion ( missed the prediction of USD 432.26 billion). The more crucial economic data may be data from Japan & China today where both are scheduled to release Services PMI (June) and Chinese Composite PMI. As it turns out, several major European countries such as France, Germany, Eurozone, UK will also publish their PMI (June) data in the afternoon WIB. The Eurozone will also monitor Inflation figures at the producer level or PPI (May) which is expected to be released at – 1.3% yoy deflation, versus the previous period’s positive 1%. Later in the evening, US Factory Orders (May) data will be released with monthly growth expected to rise 0.8% mom, compared to April’s 0.4%.
Indonesia has released Manufacturing PMI (June) data at 52.5, higher than the previous month at 50.3. This pace of expansion in the country’s manufacturing sector is one of the fastest increases observed over the past 1.5 years. The PMI figure is relatively strong as it is able to surpass the Asean Manufacturing PMI which only reached 51.0, even being able to outperform a number of major G20 countries such as China, the US, and Germany. Quoting S&P Global, the macroeconomic data release signaled an improvement in the health of Indonesia’s manufacturing sector for 22 consecutive months.
Gold prices stabilized back above USD 1900/ounce after pocketing gains as investors priced in the imminent release of the June FOMC Meeting minutes, which will provide insight into the future direction of US interest rate policy. Market participants now predict an 88% chance of the US central bank raising interest rates by 25bps at its upcoming meeting in July. The continuation of this trend actually has the potential to put pressure on Gold prices in the coming months, although at the same time the expectation of a US recession has also led to increased demand for the safe-haven asset.
In term of interest rates, the Reserve Bank of Australia has decided to hold their benchmark interest rate at 4.1% (an 11-year high) as they try to digest the impact of the 400bps hike that has been implemented since May on the overall economy. However, the central bank also mentioned that the next rate hike is still wide open, as their Inflation rate is still perceived to be high at 5.6% (May), although it has successfully eased from the peak of 8.4% last December.
Corporate News
Sandiaga Uno’s Affiliated Tower Company TBIG Offers IDR 1.5 Trillion Bonds Telecommunications infrastructure issuer of the Saratoga Group, PT Tower Bersama Infrastructure Tbk (TBIG) will conduct an ongoing public offering of Tower Bersama Infrastructure VI sustainable bonds with a principal amount of IDR 1.5 trillion. These bonds will be offered in 2 series, namely Series A with a principal amount of IDR 1 trillion with a fixed interest rate of 5.9% per annum and Series B amounting to IDR 500 billion with a fixed interest rate of 6.25% per annum. (Bisnis)
Domestic Issue
Bids Entered IDR 34 Trillion at Sukuk Auction, Local Investors Dominate The incoming bid at the State Sharia Bonds (SBSN) auction or sukuk auction was recorded at IDR 34 trillion, last Tuesday (4/7). Auction activity is still busy amid declining liquidity. Director of Sharia Financing of the DJPPR Ministry of Finance Dwi Irianti Hadiningdyah said that investor interest in this auction was still high, while liquidity conditions were lower than the previous auction. The decline in liquidity is due to the absence of Government Securities (SBN) maturing in early July. The total incoming bid at the sukuk auction this time amounted to IDR 34.05 trillion. Of the total incoming bids, the government won an auction bid of IDR 6 trillion which was in accordance with the indicative target. Thus, today’s auction was oversubscribed with a bid to cover ratio of 5.68 times, or slightly lower than the previous auction of 5.91 times. (Kontan)
Recommendation
US10YT struggles to put the benchmark yield above the 3.86% level; it will pave the way to the TARGET around 3.97% – 4.0% yield. ADVISE: Average Up accordingly. On the other hand, ID10YT is still unable to rise from the slump in this downtrend channel pattern. ID10YT yield instead looks to potentially test the lower channel support around 6.2% making investment in ID10YT more unattractive than US10YT. The nearest resistance should be MA10 & MA20 in the yield range: 6.291% – 6.309%; up to 6.32% upper channel resistance. ADVISE: HOLD.
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