Today’s Outlook:
US ECONOMIC INDICATORS: On Tuesday, JOLTS JOB OPENINGS kicked off this week’s US labor data series, unexpectedly showing there were 8.18 million job openings created in the US in June, down from 8.23 million in May, although still above economists’ forecasts of 8 million. Signs of continued labor demand underpinned Consumer Confidence in July, which rose to 100.3 from 97.8 in the previous month. Today will see the ADP Nonfarm Employment Change which forecasts 147k private sector job additions in July, as well as the all-important Chicago PMI (Jul) and Pending Home Sales (Jun) figures which are expected to bounce back to 1.4% mom from the 2.1% contraction in the previous month. So far, the market is betting that it is unlikely that the Fed will change monetary policy at the end of Wednesday’s policy meeting, but has fully priced in a 25bps rate cut at the September FOMC MEETING, with a slim chance of a 50 bps cut, and has priced in a total of 66 bps of Fed Fund Rate cuts by the end of this year.
ASIA & EUROPE MARKETS: Foreign Direct Investment (FDI) in CHINA plunged further in June, this time contracting 29.1%, up from – 28.2% in the previous month, showing how foreign investors do not see China’s current condition as a fertile ground for their investments. Further today investors will monitor China’s Manufacturing PMI figures in July which are likely to remain in contractionary territory, while the market also expects China to keep their Services activity staying in expansionary territory. SOUTH KOREA & JAPAN have started their Industrial Production (Jun) data this morning where both managed to post better than expected results, which is likely to be a positive sentiment for Asian markets today. BANK OF JAPAN is not expected to change its interest rate policy where the rate is currently at 0.1%.
Fresh worries emerged in GERMANY, when they released the preliminary Inflation estimate (Jul) which turned out to be up 0.1% to 2.3% yoy, but 2Q GDP still stayed in recessionary territory with negative economic growth of 0.1% yoy. On the other hand, EUROZONE as a whole managed to book 2nd quarter economic growth which is expected to rise 0.6% yoy in line with expectations, but awaiting further review as this is still a preliminary estimate. German unemployment and Eurozone Inflation data will follow later this afternoon, sure to serve as sentiment moving European markets.
COMMODITIES: GOLD futures prices rose 1% as traders looked to the precious metal as a safe-haven asset after Israel launched a targeted counterattack on Beirut, sparking fears of an escalation of the Israel-Lebanon war. Speaking of this MIDDLE EAST CONFLICT, that sentiment has helped shape OIL prices recently, offsetting sluggish demand from China; while OPEC+ seems to be sticking to plans to increase supply. In the meantime, BRENT and US WTI prices are both down around 1.4% which is the lowest closing price for both crude oil benchmarks since June 5 and puts them in technically oversold territory for a second day. US crude futures for diesel and gasoline also closed at their lowest levels since early June. Traders should take note of the combined sentiment between: manufacturing activity in China which is expected to shrink for the third month in July, Israeli airstrikes (retaliation) on Beirut targeting a senior Hezbollah commander, OPEC+ key ministers meeting, plus the release of US weekly crude stockpiles later tonight, as well as the imposition of the latest US economic sanctions on Venezuela related to the Latin country’s presidential election; will certainly shape sentiment regarding Crude Oil prices going forward.
Corporate News
KIJA: Optimistic to Reach Target, Jababeka is Ready to Repay USD180 Million Bonds
PT Jababeka Tbk (KIJA) sets a target of increasing sales from land development & property by at least IDR 2.5 trillion by 2024. The target supports the plan to repurchase bonds worth USD180 million, with the aim of achieving a cash balance of IDR 4 trillion. PT Jababeka Tbk is an industrial estate issuer with mature land stock in various strategic locations, including Jababeka Estate in Cikarang, Kendal Special Economic Zone (SEZ), Tanjung Lesung SEZ, and Morotai SEZ. Project progress in various regions. Founder and President Director of PT Jababeka Tbk, Setyono Djuandi (SD) Darmono, stated that to achieve a property sales target of at least IDR 2.5 trillion in 2024, Jababeka will rely on the sale of mature land in the four townships owned by the company. (Emiten News)
Domestic Issue
Government Receives IDR 24.68 Trillion Offers at Sukuk Auction on Tuesday (7/30)
The Ministry of Finance (MoF) reports that the Government’s debt position has carried out an auction of State Sharia Securities (SBSN) or state Sukuk on Tuesday (30/7). The Directorate General of Financing and Risk Management (DJPPR) of the Ministry of Finance revealed that the total incoming bid at the sukuk auction in the fourth week of July amounted to IDR 24.68 trillion. From the total incoming bid, the government won the bid according to the indicative target of IDR 8 trillion. Of the seven SBSN series offered, PBS032 is the best-selling series with the highest total incoming bid. PBS032 series is also the series with the highest nominal won by the government. PBS032 recorded an incoming bid of IDR 6.37 trillion with a total bid won of IDR 2.1 trillion for this series. The weighted average yield won by the PBS032 series was 6.72%. PBS032 will mature on July 15, 2026 with a reward rate of 4.87%. (Kontan)
Recommendation
US10YT is testing Support from the previous Low level at 4.145% yield. There is no divergence on RSI indicator, opening the possibility that this consolidation will continue towards the lower channel Support around 4.08% yield, in the channel pattern that has been seen downtrend since May, since the projection of rate cut in Sept is increasingly feasible and especially if the Fed can give clearer direction regarding this matter in the July FOMC Meeting decision on Thursday morning WIB. ADVISE: WAIT & SEE.
ID10YT also seems to have more chance to test the Support from the previous Low level around 6.90% yield. Looking at the behavior of US10YT, it is not impossible that ID10YT will also follow the consolidation prospect that will drag the yield down further to the longer time-frame Support, which is at 6.83% – 6.80% yield. MA Resistance is stacked towards yield 6.95% – 6.98%, up to the round number 7.0% psychological level will be the closest barrier, thus keeping the price on the uptrend. ADVISE: WAIT & SEE.
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