Morning Dew - 14 January 2015

World Growth Forecast Cut

JCI regained its position above 5,200 level, setting up another attempt to burst higher towards its record high at 5,262. 

World Bank forecast 3% growth of the world economy in 2015, higher than 2.6% estimate in 2014. The forecast was lower than its previous forecast of 3-4% global growth back in June 2014. Gloomy European and Japan outlook were among the factors behind the forecast cut. China’s slowdown has also worsened the outlook.

For the US economy, the World Bank is expected to grow 3.2% in 2015, up from 2.4% in 2014. In the Euro Area, growth is seen at 1.1% in 2015, slightly up from 0.8% in 2014. Japan’s economy is also seen improving in 2015, from 0.2% in 2014 to 1.2%. China’s slowdown is seen to go from 7.4% in 2014 to 7.1% this year.

Indonesia’s growth is seen slightly higher at 5.2% in 2015, vs. 5.1% estimated in 2014. As for 2016 and 2017, the World Bank forecast the economy to grow at 5.5% on both year.

USDIDR rebounded to Rp12,608/US$, from Rp12,568/US$.

BBYB IPO

Bank Yudha Bhakti (BBYB) offered 300 million shares at Rp115 per share, raising Rp34.5bn from the IPO.

BBYB forecast credit growth of 33% in 2015, supported by third-party funds growth of 21%. Profit growth is targeted at 170% to Rp48.34bn.

Proceeds from the IPO will be used for business development (72.14%) and development of IT department (27.86%)

Gozco Capital controls 53.82% of BBYB, while Military and National Police holds 25.49%, Sugeng Subroto holds 3.52%, cooperative of BBYB’s employees holds 5.24% while the public holds 11.93%.

BBYB closed its debut trading day up almost 70% at Rp195 per share.

Searching for Bottom

Oil rout continued on Tuesday, sending the US crude at $45.89 while the Brent settled at $46.59. Brent briefly fell to $45.19, at par with the US crude, making it the lowest level since 2009. UAE’s defense over the OPEC’s decision to maintain output level sent oil prices tumbling. Meanwhile, US oil output is seen shrinking in 2016, as losses mount.

In its Jan 9 report, SocGen slashed its WTI price forecast to US$51 from US$65 for 2015, while for Brent, the forecast is lowered to US$55 from US$70 for 2015.

Technically Speaking...

JCI continued to consolidate its position above the EMA-envelope, forming a triangular shape. Traditionally a continuation pattern, the JCI’s next path is likely to be up, setting it for another attempt to break its record high at 5,262, en route to 5,700-6,000 next target area.

However, should the index falls back inside the EMA envelope, it will risk returning to the 5k area.

Looking at the indicators, RSI has curled lower after reaching the overbought area while the MACD has continued to slip gradually. Volume however, spiked on Tuesday.

Weak performance from the US stocks may cap upside potential on Wednesday, but the JCI maintains its upside potential at the moment. 

Click here to download the full update (PDF)

Morning Dew - 13 January 2015

Stepping Back

JCI stepped back, tracking the losses abroad, taking the JCI back below 5,200. Losses continued overnight as oil prices fell, dragging the U.S. index further lower.

USDIDR slipped again at Rp12,568/US$ from Rp12,640/US$ a day earlier.

WSKT

PT Waskita Karya (Persero) Tbk. (WSKT) is planning to conduct rights issue worth Rp5.3tn with the government's portion of Rp3.5tn and the public portion amounting to Rp1.8tn. The State-Owned Enterprise (SOE) is 67.76% owned by the government and 32.24% by the public. Proceeds from the rights issue is set to be used for construction of toll roads (70%) through its subsidiary PT Waskita Toll Road and the remaining proceeds (30%) is set to be used to build power transmission in Sumatera which will be done by its Energy and Engineering, Procurement and Construction (EPC) division. This year, WSKT projects its net profit to reach Rp1tn. Last year, the company failed to reach its target revenues of Rp11.8tn after having booked revenues worth Rp10.4tn. Compared to 2013's revenues, the revenues figure was 7.43% higher (2013 revenues worth Rp9.68tn).On contract terms, the total value of contracts for 2015 is expected to be around Rp50tn, with Rp18tn carried over from 2014, and Rp32tn worth of new contracts.

MDLN

PT Modernland Realty Tbk. (MDLN) is aiming at marketing sales of Rp5.4tn this year, up 42% compared to last year's sales of Rp3.8tn. Two main portfolio at Cikande and Eastern Jakarta are expected to support the company's target aside from four to five new clusters set for launch this year.

Pre-marketing sales throughout 2014 were revised to Rp3.8tn from previous target of Rp4tn. The revised figure however, was still higher than its 2013 marketing sales which reached Rp3tn.

On the capex side, the property developer has prepared Rp1.3tn this year. The money is set for acquiring additional land bank about 500ha which are situated around Cikande and Eastern Jakarta. The funding will come solely from internal cash.

At the moment, MDLN's land bank totalled to 1,288ha, which means with its additional 500ha expansion plan, the total land bank area will be at 1,788ha by the end of 2015.

Rebalancing Oil

According to Goldman Sachs, oil prices may need to fall further below $40/barrel to rebalance the currently vulnerable oil prices. GS slashed its six-and 12-month forecast for WTI crude oil to US$39/bbl and US$65/bbl, respectively. Previously, the forecasts were US$75 and US$80, respectively. The Brent crude price forecast was also lowered from US$85 and US$90 to US$43 and US$70. On Monday, the Brent fell to US$47.64/bbl while the WTI slipped to US$46.35/bbl. The forecast prices will keep investment low enough to eventually rebalance the supply and demand.

Technically Speaking...

JCI continues to stay above its EMA supports, maintaining the potential to reach new heights early this year.

However, should the index falls back inside the EMA envelope, it will risk returning to the 5k area.

A setback on Monday put the index back below 5,200 as follow-through rally remains elusive. Subsequent resistance will be at 5,251, ahead of the all-time record high at 5,262. 

Despite the slow grind, the JCI is seen up to set new highs, heading towards the uncharted territories with 5,700-6,000 being the target area. 

Looking at the indicators, RSI has curled lower after reaching the overbought area while the MACD has continued to slip gradually. Volume also slipped during the Monday’s session.

Further corrections coming from the US and European stocks, suggest that the JCI is still at risk to see some more downward pressure on Tuesday.

Click here to download the full update (PDF)

Morning Dew - 12 January 2015

No Reason

JCI was steady on Friday despite impressive gains recorded abroad. 

Russian blues continued as the country’s credit rating was cut to BBB minus from BBB by Fitch rating agency. Slump in oil prices and collapse of rouble have worsened its economic outlook. The rating is now just one step away from ‘junk’ status. On Friday, Oil prices remained weak as the WTI crude oil fell to US$48.36/bbl. and Brent crude fell to US$50.11/bbl.

In the U.S., one of Federal Reserve’s voting members Dennis Lockhart said that Friday’s strong jobs report is no reason to accelerate the timing of interest-rate increase.  Lockhart sees the rate increase may occur in the middle of the year or later. Lack of wage growth, he said, suggests that slack remains in the labor market.

USDIDR was markedly down at Rp12,640/US$ from Rp12,731/US$ a day earlier.

Cement Update

Cement sales rose 1.7% (YoY) in December to 5.4 million tons, but fell 7.2% (MoM). Most cement sales recorded by Java with 56% of total cement sales in 2014. Under the current government blueprint of infrastructure projects, this year the cement sales growth is targeted around 5 to 6 percent (YoY).

Cumulatively, the total sales for the entire 2014 reached 59.9 million metric tons, up 3.3% from prior year, but missed the target set by the Indonesian Cement Association which targeted 3.5% to 4.0% sales growth (YoY). Initially, the target was set around 6%, but due to heated up political atmosphere as well as weak global commodity prices, the sales target had been revised down.

Keeping Up the Pace

Job recovery maintained the pace in December as US economy added 252k jobs in December, more than 240k that were expected, but still trailing the November’s jump of 353k. Unemployment rate was also down in December, from 5.8% a month earlier to 5.6%, lower than the 5.7% expected. Private payrolls were up 240k, beating consensus of 225k but still below November’s 345k. Average hourly earnings however, fell 0.2% in December (MoM) while it decelerated to 1.7% on year-on-year basis. US stocks fell after it racked up an impressive gains on Thursday, as DJIA finished at 17,737.37.

Technically Speaking...

JCI continues to stay above its EMA supports, maintaining the potential to reach new heights early this year.

However, should the index falls back inside the EMA envelope, it will risk returning to the 5k area.

While the resistance at 5,200 has been narrowly broken, follow-throughs remain elusive. Subsequent resistance will be at 5,251, ahead of the all-time record high at 5,262. 

Despite the slow grind, the JCI is seen up to set new highs, heading towards the uncharted territories with 5,700-6,000 being the target area. 

Looking at the indicators, RSI has shot up towards the overbought area while the MACD has been slipping gradually. Volume on the other hand, has been steady during the last three sessions.

Corrections coming from the US and European stocks, suggest that the JCI is also likely to see some downward pressure on Monday.

Click here to download the full update (PDF)

Morning Dew - 8 January 2015

Great Expectations

JCI marked its start for the year with relatively solid performance as it maintains the prospects of breaking through the historical all-time high of 5,262. Optimism over the government infrastructure agenda has boosted sentiment so far. The big question is, will the government’s mega-projects can finally come true?

Consumer confidence fell in December. The index (IKK) fell to 116.5 from 120.1, while the current economic condition index (IKE) also fell from 114.1 to 110.2. The consumer expectations index (IEK) too, fell 3.3 points to 122.8 from 126.1. Note that the IEK gauges the expectations for the next 6 months, while the IKE compares the current conditions against six months ago. Raised fuel prices were considered as behind the falling confidence, but compared to a year earlier the confidence was better this time.

USDIDR continues to weaken as the pair climbed to Rp12,732 per US$ from Rp12,658 per US$.

Commodity Updates

CPO Update: Production is expected to reach 31 million tons in 2014 compared to 29.5 million tons last year. Weather conditions remain the risk faced by CPO producers while transition from older trees to younger ones are also a constrain for production. Despite the constraints, the CPO prices will be supported after recent slump due to oversupply.

Coal Update: Ban of exports of mineral ore has limit forex earnings from the mining sector and now the government aims to raise royalties for coal miners that hold Mining Business Permit (IUP) to compensate for the lost earnings. The target is around Rp44.3tn in 2015, higher than Rp39tn target set for 2014, which is likely to be missed as the figure only reached Rp34.3tn by mid-December.

FOMC Minutes

FOMC Minutes showed that the U.S. central bank is unlikely to raise rates before April. The minutes supported the post-meeting statement from Janet Yellen that the rates may be held near zero through at least the first quarter 2015. In addition, while the state of global economy poses a threat to the U.S. economy, positive developments of the U.S. economy itself are seen mostly counterbalancing that risk. According to the minutes, inflation is at risk of getting too low beyond the Fed’s target of 2%.

Technically Speaking...

JCI continues to stay above its EMA supports, maintaining the potential to reach new heights early this year.

However, should the index falls back inside the EMA envelope, it will risk returning to the 5k area.

We have seen several attempts to bring down the resistance at 5,200, but successful breakout remains elusive. Beyond 5,200, the subsequent resistance will be at 5,251, ahead of the all-time record high at 5,262.

The coming sessions will continue to offer trading range for the JCI between 5,000 and 5,262. This year however, the JCI is seen up to set new highs, heading towards the uncharted territories with 5,700-6,000 being the target area.

We added RAJA to the reco pool. Note that no absolute stop is indicated, considering everyone has different methods/thoughts to exit a trade. Target is 2,100, almost 30% upside potential. The reco met its entry at 1,635.

Click here to download the full update (PDF)

Morning Dew - 23 December 2014

A Photo Finish

Despite the drop on Monday, the JCI’s outlook for the rest of the year remains upbeat. The record high is still within reach and there’s hardly a negative catalyst around as the Fed hype trumped most if not all, negative vibes.

Even the USDIDR continues to fall, ending the day at 12,435 after it scored a big jump last week to 12,900. FOMC’s assurance that the Fed is being patient with rates seems to have reversed the flow of the greenback back to IDR, especially with Bank Indonesia will remain vigilant over the impact of recent subsidized fuel price hike towards inflation.

Oil prices will be one of those key factors in 2015 to watch. Monday saw another drop with WTI crude fell 3.17% to $55.32/bbl and Brent crude fell 2.12% to $60.08/bbl. Continuous drop of oil prices will force the Fed to wait for a while before they can justify an interest rate hike, even amidst the improving US jobs market.

Rebuilding the Nation

Infrastructure and construction will be the key driver in the coming year, assuming the President can secure enough money to realize his vision. On the other hand, he must keep his political opponents at bay by keep on working and producing results. Else, he will face political risk which could disrupt the big picture that he envisioned.

Commodities prices remain on the slump, a risk for miners to face in 2015. Higher rates, pricier electricity, and relatively more expensive USD are also challenges faced by the nation in 2015.

The Great Divide

In the end Yellen and Co. managed to deliver the market from getting a big slump as the Fed stated its patience on rates. The coming year is likely to feature the Federal Reserve mostly as their policy will be put under the tight watch by investors. How soon the rates will be raised will be the key theme for 2015. It’s a great divide, considering that Europe and Japan are still gloomy and the door is still open for more stimulus. China’s revival is awaited, but not sure that this can happen soon enough considering Europe is still in a slump.

Technically Speaking...

The doji star has warned of the impending fall and that was exactly what happened on Monday. The JCI dropped to end at 5,125, not severe enough as it remains on track to break through the barrier at 5,262.

However, should the index continues to fall, it will risk returning to the bottom end of the recent consolidation range around 4,900.

We have seen a test of 5,200 resistance, but successful breakout remains elusive. Beyond 5,200, the subsequent resistance will be at 5,251, ahead of the all-time record high at 5,262. 

The coming sessions will offer trading range for the JCI, between 5,000 and 5,262, at least for the remainder of the year. This year however, the JCI has been up by almost 1,000 points (last year-end the JCI was at 4,274) and next year, we see the index to journey north, heading towards the uncharted territories with 5,700-6,000 being the target area. 

ECII has met its entry price, and the reco is now active.

The daily update will return on January as this is the last one for this year. We wish you all a happy holiday and a better year in 2015!

Click here to download the full update (PDF)

Morning Dew - 22 December 2014

Stumbling Block

JCI put on a strong finish for the week above 5,140, tracking the world stocks rally and erasing earlier losses incurred at the start of the week. FOMC’s wording to be “patient” on rates has put the JCI back on track to break through the barrier at 5,262, the record high for the index.

USDIDR resumed its slide to end the week at 12,500 after earlier jump to 12,900 at the beginning of the week.

Oil prices have bounced a bit on Friday. The WTI crude oil was 5.1% higher at US$57.13/bbl  while the Brent crude oil was up 3.56% to US$61.38/bbl.  The decline of oil prices have been considered as a stumbling block for the Fed as it will put inflation under pressure, giving lack or no room for the policymakers to justify for higher interest rates.

What’s next for the Fed to decide will depend also on the oil prices. Should the oil prices stay under pressure, the central bank will indeed be “patient” on rates. On the other hand, the US jobs market has improved recently, providing the Fed a reason to start raising rates soon.

SUPR

SUPR: is planning to conduct rights issue worth Rp2.4tn early next year. The plan has been approved by the shareholders  and the proceeds are to be used to pay the equity bridge facility from BNP Paribas, HSBC, ING Bank NV and JPMorgan Chase as well as Standard Chartered Bank. These banks have provided loans worth US$790 million, of which US$140 million (6-mos term) will be repaid using the rights issue funds. The remaining US$650 million (4yrs, 6mos term) will be repaid using bonds issuance next year.

Technically Speaking...

JCI returned above 50-day EMA curve again as the strong showing on Friday also bent the MACD, putting the MACD back on track to resurface beyond the zero line. Judging from the volume, Friday’s rise was backed up by a very strong volume, a good news for the bulls.

However, should the index fails to follow through the recent gains, it will risk returning to the bottom end of the recent consolidation range around 4,900.

We have seen a test of 5,200 resistance, but successful breakout remains elusive. Beyond 5,200, the subsequent resistance will be at 5,251, ahead of the all-time record high at 5,262. 

A doji star has appeared on the daily chart as Friday’s candle was somewhat separated from the prior ones and ended in a doji formation. This should be a warning that despite the potential additional gains ahead, the index is also ripe for a setback after putting a strong rally.

The coming week will offer trading range for the JCI, between 5,000 and 5,262. 

Week Ahead

It looks as if the JCI is going to have a merry end for this year. With Fed euphoria still in the air, the index is back on track to break its record high at 5,262. It may as well happen just before the year ends. But then again, strong consecutive gains recently have also presented a risk of some setback. All in all, JCI is seen fluctuating around 5,100-5,262.

Click here to download the full update (PDF)

Morning Dew - 19 December 2014

Breaking the Barrier

World stocks celebrated the FOMC’s wording as markets rallied on the assumption that the US federal funds rates won’t be up as soon as originally thought. Oil prices which have been under pressure recently, are dampening the prospect of higher rates.

JCI also cheered the Fed’s statement. The index jumped 1.5% to end back above 5,100 at 5,113. This has re-opened the prospect of breaking through the tough barrier around 5,262 and to end the year on a strong footing.

USDIDR continued to slide from the recent peak at 12,900 to 12,565 by the end of Thursday’s trading session. A perceived delay in US interest rates hike seemed to have put a brake on USD-based assets purchases and redirecting the flow back to IDR-based assets.

Overnight, US jobless claims were reportedly down by 6k in the week ended Dec 13.  The smaller the number the claims, the better and the figure supported the recent payrolls data which showed an additional of 321k jobs  back in November.

GWSA, Oil

GWSA: is offering bonds worth Rp500bn with the coupon rate between 13% and 14.25% with 5-year term. The proceeds from the bonds will be used to finance the construction and operational activities of TCC Batavia Tower (Rp150bn) and for developing projects and business development of the company.

From the energy market, WTI crude oil price saw another drop of $1.77 (3.13%) to $54.70/bbl while the Brent crude oil also fell $1.55 (2.53%) to $59.63/bbl.

Technically Speaking...

JCI returned above 50-day EMA curve again as the strong showing on Thursday also bent the MACD, putting the MACD back on track to resurface beyond the zero line. Judging from the volume, Thursday’s rise was backed up by a very strong volume and this surely a good news for the bulls.

However, should the index fails to follow through the recent gains, it will risk returning to the bottom end of the recent consolidation range around 4,900.

We have seen a test of 5,200 resistance, but successful breakout remains elusive. 

Beyond 5,200, the subsequent resistance will be at 5,251, ahead of the all-time record high at 5,262. 

The week will offer similar trading range for the JCI, between 5,000 and 5,250. 

Day Ahead

JCI is poised for a merry ending this week as US stocks resumed its power rally overnight.. Rupiah is likely to strengthen more following   the Fed’s recent comment. For Friday, JCI is seen between 5,100 and 5,200.

Click here to download the full update (PDF)