Today’s Outlook:
MARKET SENTIMENT: US November Core PCE Price Index
ASIA MARKETS: Asia-Pacific stocks and currencies fell Thursday, amid a broader market sell-off after the U.S. Federal Reserve delivered its third consecutive rate reduction and signaled fewer rate cuts ahead. Investors assessed the Bank of Japan’s decision to keep its policy rate unchanged at 0.25% for the third straight meeting. In response to the central bank’s move, the Nikkei 225 lost 0.69% to end at 38,813.58, while Topix was down 0.22%, finishing at 2,713.83. In South Korea, the Kospi index dropped 1.95% to close at 2,435.93 and the Kosdaq index declined 1.89% to 684.36. The South Korean won hovered near its weakest level since March 2009, and was last trading at 1,452.33 on the U.S. dollar. Hong Kong’s Hang Seng index declined 0.36% in the final hour of trade, while the mainland China’s CSI 300 index edged up slightly to close at 3,945.46. The Hong Kong Monetary Authority on Thursday delivered a 25-basis-point interest rate cut in lock-steps with the Fed. The country’s currency is tightly pegged to the U.S. dollar.
CURRENCY & FIXED INCOME: The dollar hovered near its two-year high on Thursday after the Federal Reserve cut interest rates and signaled a much slower monetary policy easing trajectory in 2025, while the yen weakened against the greenback after the Bank of Japan held rates steady. The dollar edged higher from losses early in the session after a stronger-than-expected reading on U.S. third quarter GDP showed the economy grew at a 3.3% annual rate. The number validated the Federal Reserve’s cautious new take-it-slow approach to easing, as did a bigger-than-expected fall in the number of applications for unemployment insurance to 220,000 last week. Yields on 10-year Treasuries jumped past 4.5% to the highest level since May and the yield curve steepened to its widest gap in more than two years in the face of the U.S. central bank’s more measured approach to interest-rate cuts in the coming year. The yield on benchmark U.S. 10-year notes rose 7.2 basis points to 4.57%, from 4.498% late on Wednesday.
– The Japanese yen dipped 0.74% to 155.94 against the greenback, hitting a one-month low, as BOJ Governor Kazuo Ueda said the central bank will continue raising policy rates if the economy moves in line with its forecast.
– European stocks fell on Thursday, with the benchmark STOXX recording its biggest single-day drop since early November as investors fled riskier assets after the U.S. Federal Reserve signalled a slower pace of interest rate cuts next year. The pan-European STOXX 600 index closed 1.5% lower, hitting a three-week low, with all the major sub-sectors in the red.
– The euro, which tumbled 1.34% on Wednesday, managed to claw back some losses and was last 0.16% higher at $1.036650 on Thursday. The Bank of England held interest rates at 4.75% as expected on Thursday. Sterling dipped, weakening 0.58% to $1.25.
COMMODITIES: Oil prices fell on Thursday after central bankers in the U.S. and Europe signaled caution over further easing of monetary policy, fanning concerns that weak economic activity could dent demand for oil next year. Brent crude futures fell by 51 cents, or 0.7%, to settle at $72.88 a barrel. U.S. West Texas Intermediate crude futures for January delivery fell 67 cents, or 1%, to $69.91 per barrel and expired on settlement. The more active WTI February contract fell 64 cents to settle at $69.38 per barrel.
– Spot gold rose 0.35% to $2,596.60 an ounce. U.S. gold futures fell 1.69% to $2,592.00 an ounce. Gold advanced but pared earlier gains after U.S. economic data reinforced expectations that the Fed will take a cautious approach to monetary policy in the coming year.
Domestic News
Entrepreneurs Suggest Prabowo Reduce Debt and Give Tax Amnesty Again
The Indonesian Employers Association (Apindo) has asked President Prabowo Subianto’s administration to keep the State Budget deficit within a low limit. Thus, the issuance of debt securities can be reduced. “On the fiscal policy side, Apindo considers that the government needs to continue the fiscal consolidation policy by maintaining a deficit of 3% of GDP,” said Apindo Chairwoman Shinta Kamdani in a press conference at the Apindo office, Thursday (19/12/2024). In the 2025 State Budget, the deficit has been set at a level of 2.53% of Gross Domestic Product (GDP) or nominally IDR 616.2 trillion. The deficit arises because the state revenue target is IDR 3,005.1 trillion, while state spending is designed at IDR 3,621.3 trillion. On the other hand, the government also needs to explore sources of tax revenue to increase Indonesia’s tax ratio by working on the underground economy, and strengthening the core tax system policy. The business community also proposes to re-conduct tax amnesty, implement Non-Filling Systems (NFS) and institutional reform. (CNBC Indonesia)
Corporate News
MFIN: Mandala Finance to Issue Bonds and Sukuk in 2025
Finance company PT Mandala Multifinance Tbk (MFIN) or Mandala Finance plans to issue bonds and sukuk in 2025 to support the company’s strategic initiatives. This step is in line with the growing funding needs in order to expand business coverage and increase access to financing for the people of Indonesia. Mandala Finance Managing Director Christel Lesmana said that the bond and sukuk issuance will be an important part of the company’s funding strategy next year. The funds raised will be utilized for various needs, including financing distribution, supporting operational activities, and working capital needs. “The issuance of bonds and sukuk will be carried out in accordance with the company’s funding target plan in 2025 which is adjusted to the needs of the financing distribution target to support various initiatives and business operational activities, as well as working capital needs in reaching and distributing appropriate credit to more Indonesians,” Christel told Bisnis, Thursday (19/12/2024). Christel added that in this planning process, Mandala Finance will carefully review various factors, such as funding needs, economic conditions, markets, and demand trends. This is done to ensure that the company’s strategic steps remain relevant and support sustainable growth. (Bisnis)
Recommendation
US10YT continued its current uptrend and broke out of its resistance of 4.520-4.522%. NHKSI is of the opinion price action will contiue to its next resistance at 4.643% before reaching the following resistance at 4.739%
ID10YT continued it uptrend after forming a flag pattern after rebounding from the uptrend channel pattern support at 6.916%. There is still room for the yield to extend its rally to the uptrend channel resistance area of 7.203-7.213%.
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