Today’s Outlook:
US & GLOBAL MARKETS: This beginning of the week will be filled by financial reports and three meetings of the world’s central banks, which could possibly make the United States and the United Kingdom open the door to interest rate cuts. Not to mention US labor data for July, plus closely watched surveys on US and global manufacturing, as well as Eurozone GDP and inflation data will also be released later this week. Elsewhere, the US Treasury will outline its bond sale plans for this quarter, while China’s politburo meeting is expected to spawn more stimulus after last week’s surprise rate cut. After a tame June Inflation report, markets are betting that the Federal Reserve will have a more solid reason to decide on an interest rate cut in September, at the end of the FOMC MEETING next Wednesday. Surveys have fully priced in a 25bps easing and even factored in a 12% chance of a 50bps cut, and have also forecast another 68 bps cut in December.
Later tonight investors will look forward to the CB CONSUMER CONFIDENCE (Jul) data as well as the first report of the US labor data series JOLTS JOB OPENINGS, where it is forecast that there will be an increase of 8.03 million job openings in June, compared to 8.14 million in the previous month.
ASIA & EUROPE MARKETS: Today a lot of data will make investors focus their attention on the EUROPEAN continent: GERMAN GDP will be in the spotlight for Eurozone markets today where they expect the preliminary Q2 economic growth figure to come in at 0.1% qoq, slowing from the previous quarter’s 0.2%. Later in the afternoon, EUROZONE GDP will be monitored to see if it is able to reach 0.6% qoq in Q2 this year, up from 0.4% in the previous quarter. Finally, the GERMAN CPI figure will close the key European data tonight when the actual figure is compared to the 2.2% yoy estimate for July Inflation. Asian & European CENTRAL BANK MONITORING this week: BANK OF JAPAN will also meet on Wednesday, and the market is signaling a 70% chance that they will raise rates by 10 bps to 0.2%, with some scenarios they could decide by 15bps. In contrast, investors are less certain whether the BANK OF ENGLAND will ease monetary policy at Thursday’s meeting, with futures suggesting a 51% chance of a cut.
CURRENCY & FIXED INCOME: The DOLLAR INDEX, which measures the greenback’s strength against a basket of other major world currencies including the Yen and Euro, was up 0.18% at 104.56. The benchmark 10-year US Treasury yield fell 3bps to 4.171%, the lowest in more than a week.
COMMODITIES: GOLD slips as Dollar strengthens. Gold spot prices fell 0.08% to USD 2,383.64/ounce, and US gold futures closed down 0.1% at USD 2,377.80. In terms of other commodities, OIL prices fell in volatile trading; triggered by developments in the Gaza War where Israeli officials said they wanted to avoid an escalation of the Middle East conflict even after a rocket attack on the Israeli-occupied Golan Heights, for which Israel and the United States accused Lebanese armed group Hezbollah of responsibility. BRENT crude oil futures closed down 1.7% at USD 79.78/barrel; while US WTI ended 1.8% lower at USD 75.81/barrel.
Corporate News
ADMF: Adira Finance Ready to Pay Off Two Maturing Bonds in the Second Semester/2024
Adira Dinamika Multi Finance Tbk (ADMF) or Adira Finance will pay off two bonds that mature in the second semester of 2024. The two bonds are the 2019 Adira Finance Phase VI Sustainable Bonds IV Series C with an emission value of IDR 190 billion which will mature on October 4, 2024, and the 2023 Adira Finance Phase II Sustainable Bonds VI with an emission value of IDR 834.39 billion which will mature on November 19, 2024. Adira Finance Director, Sylvanus Gani Mendrofa, stated that Adira Finance’s liquidity is currently good enough to pay off its financial obligations. “The company plans to pay off the bond principal and interest on the maturity date using the company’s internal cash,” Gani told Bisnis on Sunday (26/7/2024). In the first quarter of 2024, ADMF’s cash and cash at banks at the end of the period was recorded at IDR 1.71 trillion, up from IDR 1.39 trillion in the first quarter of 2023. With this financial performance, Gani said ADMF was able to pay off its financial obligations while funding the company’s business needs. (Bisnis)
Domestic Issue
Debt Ratio for First Half of 2024 Nearly 40% of GDP, Hits IDR 8,444 T
The Ministry of Finance (Kemenkeu) reported that Indonesia’s debt position as of June 2024 touched IDR 8,444.87 trillion. Thus, the ratio of debt to Gross Domestic Product (GDP) was recorded at 39.13%. Launching the APBN Kita July 2024 document published by the Ministry of Finance, the debt position was recorded to have increased by IDR 91.85 trillion compared to the previous month which amounted to IDR 8,353.02 trillion. “As of the end of June 2024, the maturity profile of government debt is relatively safe with a weighted average time maturity (ATM) of 7.98 years,” as written in the APBNKita document July 2024 Edition, quoted Tuesday (30/7/2024). Based on composition, Government Securities (SBN) were recorded at IDR 7,418.76 trillion or 87.5% of total government debt as of June 2024, then divided into IDR 1,451.07 or 17.18% are Foreign Exchange SBN and IDR 5,967.70 or 70.67% are Domestic SBN. When compared to the previous month, debt originating from SBN was recorded to have increased by IDR 71.26 trillion or grew by around 0.97% on a monthly basis. That way, the increase in debt from SBN still dominates the growth of government debt as of June 2024. Meanwhile, the remaining 12.15% or IDR 1,026.11 trillion were loans, with domestic loans recorded at IDR 34.1 trillion and foreign loans amounting to IDR 988.01 trillion. Government debt originating from loans was recorded to have increased by IDR 20.59 trillion when compared to the position at the end of May 2024, that figure grew 2.05% on a monthly basis. “The debt ratio as of the end of June 2024, which amounted to 39.13% of GDP, was consistently maintained below the safe limit of 60% of GDP in accordance with Law Number 17/2003 concerning State Finance,” he said. The June 2024 debt-to-GDP ratio of 39.13% has exceeded the debt ratio limit range set by the government for 2025, namely, 37.82% – 38.71% of GDP. (Bloomberg Technoz)
Recommendation
US10YT is again testing the Support area from the previous Low level around 4.16% yield, where this time the RSI indicator shows a positive divergence, just when the candle also formed a long-leg Hammer / Dragonfly (indicating bullish reversal soon). Timing is crucial, especially when the market is waiting for the FOMC Meeting this July 30-31. Nearest Resistance: MA10 & MA20 around 4.23%-4.24% yield; if it is able to be broken, it will lead the yield back to strengthen towards 4.315%. Conversely, if it turns out that the Fed meeting gave a surprise interest rate cut unexpectedly then the yield will go to the lower channel support around 4.07%.
ID10YT seems to have preceded the Federal Reserve’s decision with the yield turning down after being unable to break through the stack of MA Resistance to return above the psychological level of 7.0%. ID10YT will again try the Support from the previous Low level at a yield of 6.90% before continuing to slide down towards a yield of 6.84% / 6.76%-6.74%. ADVISE: anticipate price strengthening that will continue to occur.
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