Fading Euphoria
Initial election rally continued to dissipate as the JCI fell for another 0.23% on Monday, the third consecutive decline after the JCI hit 5,165 on Thursday. The fall however, seems to be cushioned by the 5k mark, as the market awaits July 22nd announcement of the election result from KPU.
With various reported suspicions over the voting process and results, it is too early to conclude who the winner is. Moreover, we can actually see on July 22nd the losing side to appeal before the constitutional court. If this happens, the final say could go beyond July 22nd, casting continued uncertainties over the nation.
Elsewhere from the US, the strong performance of US stocks recently has led Goldman Sachs to lift its S&P 500 estimate to 2,050 for this year, 2,100 for 2015 and 2,200 for 2016. According to GS, stocks with lower valuations will outperform the market before the Fed starts to raise the rates. While earnings will continue to rise, further P/E multiple expansion is not likely to follow. Currently the index P/E ratio is at 18.1x, the highest since March 2010.
USDIDR stayed unchanged at 11,627 per US$, as election uncertainties limit both the upside and the downside potential.
Coal and Cement
Coal production grew 7.6% in 1H14 from the same period a year earlier to 213 million tons. About 75% of the outputs were exported. This year the coal production is aimed to hit 421 million by the end of the year.
Cement sales have trailed the target set for 2014 as the 1H14 sales data showed only 28.9 million tons were sold. The forecast sales were seen at 61 million, or 5.1% above 2013 sales. Economic slowdown has been seen as the factor behind the slowdown.
Technically Speaking...
JCI fell further on Monday as the index retraced its recent gains, but still struggling to hold above the 5k mark.
The next resistance lies at 5,165, the recent intraday high. Beyond this the index will aim at 5,251 – the all-time high seen last year.
Near-term support is seen at 5,000, followed by 4,900, the former EMA-50 resistance now turned as support. Afterwards, 4,800 and 4,775-4,780 where the 100-day EMA lies.
MACD advance stalled and it ticked down a bit, while RSI has entered the overbought zone and fell slightly. Volume dipped further on Monday, suggesting that the fall might have been temporary and that a rebound is close by.
We have added SMRA and WSKT to the reco pool. Please check the details on the table below.
Day Ahead
Conflicting quick counts results means that the country will have to hold its breath and wait until July 22nd when the official result will be announced by the KPU. Still, the market seems to be favoring Jokowi-JK’s win. Early euphoria seemed to be short-lived and the mood has returned to somewhat neutral. Stay cautious until the real results are announced.
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