Oil Slick Ahead
Oil rout continues as WTI for January fell $2.14 or 3.6% to $57.81 a barrel while Brent declined $1.83 to $61.85 a barrel. Prolonged weakness of oil prices may actually put the US Federal Reserve’s off track of its rate rise scenario. With little or no inflation catalyst, the central bank will have a hard time justifying its plan to raise the Fed funds rate sometime in 2015.
The US central bank is set to meet on Tuesday and Wednesday, and with unemployment rate at 5.8%, the gauge has been well below the Fed’s mark of healthier recovery. With QE3 gone, the market will be keen to see whether the Fed will finally drop the words “considerable time” from the FOMC statement, to open the door wide open for a higher interest rate. For now, the expectations are for the Fed to raise rates sometime in mid-2015.
Domestic car sales fell 15% in November 2014 (yoy) to 91,449 units. 11M14 sales reached 1,129,746 units or 0.2% lower from the same period a year earlier. The target for this year seems to be hard to achieve, which is set at 1,250,000 units.
USDIDR continues to climb on Friday, reaching 12,432 per US$ vs. Thursday’s 12,336.
WIKA, COWL
WIKA: Trimmed government budget on infrastructure projects has led to the delays on several state-owned enterprises this year, including WIKA. The company expects to earn just 90% of its total target set earlier at Rp678.65bn. Net profit is expected to be at Rp610.76bn and by the end of 3Q14 the accumulated net profit has reached Rp400.71bn. For new contracts, 11M14 the total worth of new contracts is at Rp13.9tn, or 53.81% of target set for this year at Rp25.83tn.
COWL: Obtained credit facility on Dec 10th 2014 based on Facility Agreement from PT QNB Indonesia and Qatar National Bank SAQ Singapore Branch. The credit worth US$163 million and will be used for working capital, project developments and other financing.
Technically Speaking...
JCI inched higher on Friday, settled at 5,160, but barely able to make significant breakthrough on the upside.
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.
MACD has re-entered the sub-zero line while the RSI remains stuck near the neutral area. This suggests that while the index is steady, the risk of slipping further remains as indicated by MACD.
The coming week will offer similar trading range for the JCI, between 5,000 and 5,250. As the upside remains sluggish, the downside risk cannot be ruled out.
Week Ahead
Friday saw a major upheaval stemming from the energy sector where oil rout continues. With over 300 points drop in DJIA, it is very probable that the JCI is a likely victim when it returns to the floor on Monday. A continuous drop in oil price is expected to push the government to rethink its recent subsidized fuel price hike. For Monday, expect the index to face pressure as the Asian market responds to the latest oil prices rout seen on Friday. A range between 5,000 to 5,250 is seen for the coming week.
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