SUN Market Mixed, amid government affirmation of recession opportunities in 3Q20. Market players responded to Minister of Finance Sri Mulyani’s statement that there was a risk that 3Q20 economic growth would be negative by -2%. Previously, the movement on the SUN market was supported by positive sentiment for the strengthening of the rupiah. This appreciation of the rupiah, amid abundant liquidity in the US dollar, following the Fed’s quantitative easing policy, resulted in FR0086 and FR0087 which have recorded significant increases in the past two weeks. From the external side, the US and China have made progress and are committed to taking the necessary steps to ensure the success of the phase 1 trade agreement. This sentiment has prompted investors to start looking for long tenor SUN to anticipate short-term volatility. Investors are starting to look at the long tenors FR0083 and FR0076, which offer attractive yields compared to short tenors.

JSMR Releases IDR 1 Trillion Securities. Jasa Marga Tbk (JSMR IJ) has postponed issuing the Sharia Asset Backed Securities Collective Investment Contract (KIK-EBA) which was planned since last year. However, the company will expand its financial instruments by issuing Commercial Securities (SBK) or commercial paper worth IDR 500 billion – IDR 1 trillion. Jasa Marga’s Corporate Finance Group Head Eka Setya Adrianto said this commercial paper is similar to a discounted bond because it is issued with a discount and a tenor of one year. Meanwhile, the issuance of KIK-EBA is said to be postponed and will be reviewed at the end of the year if the company still needs further funding. SKB itself is a short-term debt note issued without collateral on the money market and issued by a company or financial institution. These debt securities can be issued by non-bank corporations as an alternative source of short-term funding. Some of the financing alternatives being considered include the Islamic KIK-EBA with a target fund of at least IDR 2 trillion. For this securitization, the company will use the basic asset of ticket revenue from the Jakarta Outer Ring Road (JORR) Cilincing-Cikunir. (CNBC Indonesia)

Realization of PEN Health Budget was 8.4%. The Ministry of Finance (Kemenkeu) noted that the realization of the health budget in the National Economic Recovery (PEN) program until August 19, 2020 was only 8.4% of the total budget. As for the nominal realization of the health budget of IDR 7.36 trillion, it is still far from the budget ceiling of IDR 87.55 trillion. Of the total budget, IDR 48.9 trillion has a Budget Implementation List (DIPA), without DIPA IDR 3.8 trillion, and there is no DIPA IDR 34.9 trillion. However, the realization as of August 19, 2020 was equivalent to 13.98% when calculated from the existing DIPA budget and without DIPA. Meanwhile, the absorption of the central and regional health budgets is IDR 1.86 trillion; health worker death benefits amounting to IDR 21.6 billion; the cost of health care services by the Covid-19 Task Force amounting to IDR 3.22 trillion; import duty incentives and exemption from value added tax (VAT) on health amounting to IDR 2.26 trillion. Finance Minister Sri Mulyani Indrawati added that the progress of the health budget is indeed in a slowing trend. From July to 19 August 2020 the budget absorbed was only IDR 290 billion. Lower than the final uptake of 1H20 to July of IDR 2.11 trillion. (Kontan)

The realization of the PEN program is one of the driving forces for market optimism. Yesterday, the rupiah weakened slightly by 0.19% to IDR 14,678 / USD in the spot market. Meanwhile, BI’s middle rate weakened 0.03% to IDR 14,636 / USD. Apart from domestic sentiment, the bond market is also watching between the US and China which is re-evaluating the phase I trade agreement, which can provide a buffer for the rupiah. Meanwhile, the development of vaccines that have begun to be mass produced has the potential to depreciate the US dollar. Investors are watching FR0086 and FR0087, which have recorded significant increases in the past two weeks. On the other hand, market players can start to pay attention to the long tenors FR0083 and FR0076, which offer more attractive yields than short tenors.