Today’s Outlook:
The S&P 500 and the Nasdaq Composite fell on Friday and posted their second straight weekly losses, as hotter-than-expected U.S. producer prices data pushed Treasury yields higher and sank rate-sensitive megacap growth stocks. The U.S. government reported that the producer price index (PPI) climbed 0.8% in the 12 months leading to July, up from a 0.2% rise in the previous month, as costs of services increased. Economists polled by Refinitiv had expected a 0.7% gain. Though traders broadly expect the Federal Reserve to refrain from tightening credit conditions for the rest of the year, bets for no rate hike in September slipped to 88.5% from 90% before the PPI data landed. Yield on the two-year U.S. Treasury note, that moves in line with near-term interest rate expectations, climbed to 4.88%. This move weighed on big tech names, as high interest rates could slow the economy and dent the ability of these firms to achieve the growth projections which have pushed them to premium valuations. Higher rates can also make interest-bearing bonds an attractive alternative to stocks for some risk-averse investors.
Speaking of continental Europe, the UK released June GDP data that grew 0.8% yoy and 0.5% mom, higher than expected; and confirmed second quarter GDP at 0.4% yoy & 0.2% mom, both higher than forecast and previous quarter. No wonder June UK Industrial Production managed to crawl to 1.8% mom, even reversing the previous month’s negative 2.1% to 0.7% yoy. Similarly, Manufacturing Production turned into positive growth territory of 3.1% yoy in June after posting minus 0.6% in May. From the Asian continent, China reported New Loans (July) fell to 345.9 billion Yuan, much lower than expectations of 800 billion Yuan and the previous month’s massive 3.05 trillion Yuan.
Last but not least, last Friday the University of Michigan released the Michigan Consumer Sentiment & Current Conditions outlook in August which gives a more optimistic picture of the US economic situation for the next 6 months.
Corporate News
Prone to Liquidity Pressure, Pefindo Affirms idBBB- Rating of PP Properti (PPRO) Pemeringkat Efek Indonesia (Pefindo) affirmed the idBBB- rating of PT PP Properti (PPRO). The rating also applies to sustainable bonds II/2020 still in circulation. The outlook for the company’s rating is stable. The company’s rating reflects strong support from Housing Development (PTPP). The portion of recurring income is good, and the location of the property is relatively diversified. The rating is limited by high financial leverage, cash flow protection indicators, weak liquidity, and sensitivity to changes in macroeconomic conditions. (EmitenNews)
Domestic Issue
Bonds Maturing in Semester II-2023 Dominated by AAA Rating PT Pemeringkat Efek Indonesia (Pefindo) noted that the number of corporate bond maturities in semester II reached IDR 74.79 trillion. The majority of maturing bonds have a AAA rating. Head of the Economic Research Division of Pefindo Suhindarto said, for maturities in the remaining second semester of 2023 based on the most dominant ratings are AAA, A, and AA ratings. While other bonds that will mature have a BBB rating of 3%. Furthermore, others that include unrated debt securities amounted to 6%. From the nominal value, the AAA rating reached IDR 30.63 trillion. Then the A rating is IDR 21.68 trillion and the AA rating is IDR 15.68 trillion. The BBB rating bonds amounted to IDR 2.31 trillion and others amounted to IDR 4.47 trillion. Based on this, Suhindarto assessed that the potential for bond defaults in the second semester is relatively low. Moreover, until July 2023 there is only one company, namely PT Waskita Karya (Persero) Tbk (WSKT). (Kontan)
Recommendation
US10YT is facing a Resistance from the previous High level at a yield of 4.206%, amidst the leading indicator of RSI negative divergence, which gives a warning that this time momentum is not as big as before. ADVISE: anticipate trend reversal, Sell on Strength.
ID10YT yield uptrend within the PARALLEL CHANNEL pattern is still intact, as long as the yield does not break the lower channel support as well as MA10, below 6.327%. Conversely, the nearest resistance that needs to be faced is yield: 6.369% – 6.40%. ADVISE: HOLD; Buy on Weakness.
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