Today’s Outlook:
US MARKETS: The ISM Manufacturing Index for July came in at 46.8, below the forecast of 48.2; an 8-month low and plunging into contraction territory. These two reports added to concerns about an economic slowdown even as the Federal Reserve is expected to cut interest rates next month. Whereas in the past the market thought the Fed was too late to raise interest rates, now analysts are concerned that the Fed will keep monetary policy tight for too long and cut interest rates too late, jeopardizing the potential for a soft landing. The 10-year US Treasury yield has fallen below 4% for the first time since February as jitters about a hard landing resurfaced. Today there will be crucial labor data that market participants are waiting for, namely US Nonfarm Payroll, plus Unemployment Rate & Average Hourly Wage Growth for July, which is one of the important factors to further confirm Fed Chairman Jerome Powell’s comments of a rate cut in Sept.
ASIA & EUROPE MARKETS: Manufacturing PMI slips were also seen in CHINA and GERMANY, but the EUROZONE as a whole and the UK were still able to maintain the expansionary pace of their manufacturing sectors in July. BANK OF ENGLAND finally decided to cut interest rate by 25bps as expected to 5.0%; this is their first rate cut since the rate hike in December 2021 from the bottom rate of 0.1%. This morning SOUTH KOREA has released Inflation figures for July at 2.6% yoy, growing 0.1% above the forecast of 2.5% and also still heating up from the previous month’s 2.4%. Speaking of Inflation, let’s not forget INDONESIA has announced a manageable Inflation figure at 2.13% yoy, successfully sloping below expectations, even on a monthly basis recorded deflation of 0.18% mom following the decline in prices of goods & services that had occurred in the previous month by -0.08%.
COMMODITIES: OIL prices fell more than 1% on Thursday, as global supply seemed unaffected by the widening MIDDLE EAST CONFLICT after the killing of Hamas leader in Iran which had spiked Crude Oil prices by around 4%, while traders also refocused on sluggish global demand especially when official Chinese government data showed China’s manufacturing activity dropped to a 5-month low. BRENT benchmark oil prices closed down 1.6% at USD 79.52/barrel, while US WTI tumbled 2.1% lower to USD 76.31.
Corporate News
ADMF: Adira Finance Has Issued Bonds and Sukuk Worth IDR 2 Trillion in 2024
PT Adira Dinamika Multi Finance Tbk (Adira Finance) has issued bonds and sukuk with a total value of IDR 2 trillion throughout the current year 2024. Adira Finance Chief Financial Officer Sylvanus Gani said that the issuance of debt securities was in accordance with the information disclosure submitted by the company. Where, Adira Finance has issued Sustainable Bond VI Phase III Year 2024 with a principal amount of IDR 1.6 trillion. “In addition, Sustainable Mudharabah Sukuk V Phase III Year 2024 with total funds of IDR 400 billion,” he told Kontan, last Wednesday (31/7). Regarding the next bond and sukuk issuance plan, Gani said the company will continue to observe the latest business conditions and future funding needs before making a decision. Previously, PT Pemeringkat Efek Indonesia (Pefindo) said, the value of debt securities issuance by the multifinance industry reached IDR 13.24 trillion during the first semester of 2024. (Kontan)
Domestic Issue
Immediately Offered, SR021 Sales Projected to Reach IDR 24 Trillion
Retail Sukuk (SR) series SR021 is believed to be able to reap sales of up to IDR 24 trillion. The plan, SR021 will be issued on August 23 – September 18, 2024 (tentative). Bank Permata Chief Economist Josua Pardede believes that the SR021 offering will still be the choice of investors. This optimism is in line with the debt securities market conditions which are seen as getting better. Josua pointed out that the current bond market conditions are more positive, when compared to the bond market conditions at the time of the issuance of the previous retail sukuk series, SR020 in March. Sentiment is considered likely to improve in the bond market, especially due to expectations of a faster Fed interest rate cut. In addition, the yield of 10-year conventional SBN is already in the range of 6.8-6.9%. “With the increasing appetite of bond investors, we expect SR021 to be sold in the range of IDR 20 trillion – IDR 24 trillion in the upcoming August sales,” Josua told Kontan.co.id, Thursday (1/8). Regarding the potential yield or coupon of SR021, Josua observed that the Sharia Retail SBN coupon will still be above the 6% level. This is reflected in the SR020 coupon of 6.3% for a 3-year tenor and 6.5% for a 5-year tenor, with the BI rate still at 6.0% at that time. In line with the increase in BI rate to 6.25% at present, the SR021 coupon that will be offered will also increase to the range of 6.2%-6.5% for the 3-year tenor, and 6.4%-6.7% for the 5-year tenor. “The coupon rate in the range of 6% is expected to remain attractive to investors. Moreover, with the potential for Fed rate cuts in the second half of 2024, capital gain expectations have also increased,” said Josua. (Kontan)
Recommendation
US10YT has almost reached its Target bottom at 3.92% yield (current: 3.97%) thanks to the Fed’s increasingly feasible rate cut projections. RSI is now Oversold. ADVISE: anticipate limited downside potential on yield, weak US economic data should also support a rate cut; monitor today’s key US Nonfarm Payroll data for further US Treasury direction guidance.
Similarly, ID10YT has also entered the mid-term trendline support region for yield, located at 6.80%. ADVISE: anticipate limited downside potential on yield. RSI is approaching Oversold territory.
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