Morning Dew - 30 January 2014

Another USD10b More

JCI moved higher on Wednesday as Turkey’s central bank stepped in and raised interest rates to quell the steep decline of Turkish lira. Similarly, South African central bank also decided to raise the interest rates.

From the US, the FOMC meeting decided that another $10bn must go. The amount of monthly bond purchases is now $65b per month. The Committee viewed that while labor market indicators were mixed, on balance however, the indicators showed further improvement. On unemployment rate, the Fed Chairman Ben Bernanke pointed out that the unemployment rate has declined, but it’s still elevated. Bernanke himself is scheduled to be out of office and to be replaced by his colleague, Janet Yellen starting in February.

Rates Raised

In Turkey, one-week repurchase rate was raised to 10% from 4.5%, overnight lending rate was raised to 12% from 7.75%while the overnight borrowing rate from 3.5% to 8%.

South Africa’s central bank unexpectedly raised its interest rates by 50 basis points.

In Argentina, relaxed regulation to buy dollars failed to attract interests.

Technically Speaking...

JCI continued to rise on Wednesday, hitting the intraday high at 4,432. This is the upper border of the EMA-band.

Recent low at 4,286 will be the nearest support line while the next big support comes at 4,161, followed by 4,109 and 3,837.

Upside potential remains, but as we bumped into the EMA resistance around 4,435, the JCI is vulnerable again and is likely to step back a bit.

MACD is now inching even closer to the zero line, while RSI stays high around 70%.

No new recommendations for now as we prefer to see the market stabilizes a bit after a major sell-off recently.

Day Ahead

Turkey and South Africa have at least stem the fall in both lira and rand, respectively. This week is to be cut short by national holiday on Friday, so it is likely that we may see less activity this Thursday. Fed’s move to cut more stimulus has triggered another 1.19% fall in the Dow. JCI itself then, will be vulnerable during the coming session.

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Morning Dew - 29 January 2014

Awaiting The Fed

JCI bounced off lows as bargain hunting pushed the stocks up.  Market participants are now setting their eyes on the Federal Reserve meeting. They are keen to see how much stimulus will be removed this time after the last time $10bn was taken off.

If the Fed opts not to reduce the stimulus, the market may rally. If the Fed opts to deliver another cut in stimulus, it should be neutral except if the Fed taper more than $10bn, the market may respond negatively.

The biggest pressure point for JCI comes from the vulnerability of emerging market economies. Political issues in Ukraine and Thailand, combined with economic issues in Turkey and Argentina have dealt a massive blow to the sentiment recently. 

Durables Fell

Durable goods orders fell 4.3% in December, way below consensus number. 

Consumer confidence on the other hand, jumped to 5-month high in January. The sentiment index inched higher from 77.5 to 80.7, beating estimate number among consensus (78).

Home prices in 20 US cities were reportedly 20% higher in November. Case-Shiller index was up by 13.7% after a 13.6% gains seen in October.

Technically Speaking...

JCI bounced on Tuesday, ending the day at 4,341.

Recent low at 4,286 will be the nearest support line while the next big support comes at 4,161, followed by 4,109 and 3,837.

While fairly limited, upside potential is seen as the index will struggle to reclaim its area inside the EMA-band around 4,340-4,435.

MACD has fallen sharply and currently flirting with the zero line while RSI stays high near the overbought area.

No new recommendations for now as we prefer to see the market stabilizes a bit after a major sell-off recently.

Day Ahead

Selloffs in the emerging markets were ill omens for the index. The FOMC meeting will be in focus, while developments in the emerging economies engulfed in turmoil (such as Brazil, South Africa, Argentina, Turkey and Ukraine) are also going to be watched keenly by investors. 

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Morning Dew - 28 January 2014

Falling Like A Brick

JCI nosedived as woes in the emerging markets sent most stocks southwards.

The index fell through layers of supports like a brick and despite it bounced off lows, it failed to bounce high enough to bring some relief. 

Political turmoil in Ukraine, Turkey and Thailand, in addition to Argentina’s economic problems have set off a similar wave of selling just like what happened last year when the Federal Reserve first dropped the hint for the then upcoming stimulus removal.

Removing the stimulus has been considered as getting ready for interest rates hike, and this put the USD-based assets in favorite positions compared to the emerging economies’ assets, which were the darlings of the market during the ultra-accommodative period of the Federal Reserve.

New Home Sales Fell

US new home sales fell 7% in December from a month earlier. The fall was worse than the consensus which had expected a 1.9% decline after a 3.9% decline in November.

In Germany, IFO index for business climate was slightly higher in January at 110.6, up from 109.5 and better than the expected 110.0. Current assessment also up from 111.6 to 112.4, while expectations index rose from 107.4 to 108.9.

Technically Speaking...

JCI tanked and ended below its EMA band as selloff continued on Monday.

As the support at 4,430, 4,380 as well as 4,335 were all broken, the next big support comes at 4,161, followed by 4,109 and 3,837.

While fairly limited, upside potential is seen as the index will aim to reclaim its area inside the EMA-band around

No new recommendations for now as we prefer to see the market stabilizes a bit after a major sell-off back on Friday.

Day Ahead

Selloffs in the emerging markets were ill omens for the index. The FOMC meeting will be in focus, while developments in the emerging economies engulfed in turmoil (such as Brazil, South Africa, Argentina, Turkey and Ukraine) are also going to be watched keenly by investors. 

Click here to download the full update (PDF)

Morning Dew - 27 January 2014

Emerging Risk

While concerns over China’s recent manufacturing slip-up and that the Fed has started its tapering process were already pretty much factored in by the markets, the emergence of risks coming out of emerging economies is relatively fresh for investors.

Argentina’s central bank has decided to abandon its support to its currency. Currency controls have been scrapped, allowing the purchase of dollars for savings.

In South Africa, rand fell 1.8% on the back of mining issues while Ukraine suffered from political turmoil. Turkey is still struggling after been hit by corruption scandal, which sapped the investors’ confidence. Its lira intervention efforts have been unable to lift the currency.

All the emerging economies’ problems originated mainly on the Fed’s decision to taper its $85bn stimulus, sending money out of emerging economies.

Fed In Focus (Again)

The FOMC is set to meet next week and the market will be keen to see how much the stimulus reduction will be this time. The first tapering was $10bn, taking the remaining monthly purchases to $75bn. It is likely that the Fed will keep the same pace at $10bn. Despite improving life signs of the US economies, the Fed may not want to rush things by going aggressive.

If however, the Fed opts to refrain from cutting the stimulus, the market may rebound from recent slump.

Technically Speaking...

JCI sunk to end at 4,437 on Friday as all sectors turned red.

Toppish MACD and RSI as well as stochastics, as well as declining volume suggest that the index is vulnerable to correction.

For now, the support comes in at around 4,430 (the upper-EMA band), but this could be easily sliced through on Monday, putting the next support at 4,380 and 4,335 (the middle and lower EMA curves). We cannot rule out a straight dive to the latter next Monday.

With 4,430 is most likely gone, the upper-EMA band will be the closest resistance, followed by 4,510.

Week Ahead

Friday’s selloffs in US and Europe were ill omens for JCI’s outlook next week. The week is likely to start on a wrong foot. The FOMC meeting will be in focus, while developments in the emerging economies engulfed in turmoil (such as Brazil, South Africa, Argentina, Turkey and Ukraine) are also going to be watched keenly by investors. 

Click here to download the full update (PDF)

Morning Dew - 24 January 2014

Flash Alerts

Stocks posted more gains on the back of recent update from IMF over the global economic growth outlook. JCI ended at 4,477.49, up 0.56% from prior session.

Slowing manufacturing sectors in US and China reported post-closing of JCI. Flash estimates from the January readings were behind the fall of US and European stocks fall. This may echo on Friday’s trading sessions in Asia.

Agriculture (+1.81%) and finance (+1.48%) sectors were the top gainers, while consumer goods (-0.39%), mining (-0.27%) and trade (-0.22%) fell.

IDR ended slightly weaker at 12,173 per US$.

BI said that inflation may exceed 1% in January as the combination of severe flood, higher LPG price as well as rising electricity tariffs are seen driving prices up.

China and US PMIs Slipped

A flash estimate of manufacturing PMI showed that China’s manufacturing contracted in January. The PMI index from HSBC/Markit fell from 50.5 to 49.6, well below consensus of 50.4 and also below the expand/contract borderline level of 50. Above 50 is considered as expanding while below 50 is considered as contracting.

US preliminary PMI also fell in January from 54.4 to 53.7 instead of heading up to 55.0 as forecast by consensus.

Technically Speaking...

JCI inched higher to end at 4,496.04 on Thursday. 

Both RSI and stochastics indicators remained around the overbought area, whilst MACD held its position above the zero line. Volume however, has not been able to rise to new heights. This signals potential exhaustion. 

Next resistance area lies around 4,600-4,610. Fibonacci projection targets 4,700, however. On the downside, near-term support lies at 4,450-4,460, 4,400 and subsequently, 4,327 - a prior resistance now turned into support. Below 4,327 we also have support at 4,175 and 4,109.

Day Ahead

The upside potential remains intact for now, but worse than expected PMI readings from China and US may prompt profit-taking on Friday. The index is expected to retreat before it resumes to knock on the 4,600-4,610 resistance area. Should it pass the resistance area, 4,700 awaits. Below 4,400 may drive the index approaching the lower 4,300 support area.

Click here to download the full update (PDF)

Morning Dew - 23 January 2014

IMF’s View

Stocks posted more gains on the back of recent update from IMF over the global economic growth outlook. JCI ended at 4,477.49, up 0.56% from prior session.

Better assessment on US economy was the major driver behind the upward revision of IMF’s growth outlook.

Mining (+1.91%), trade (+1.62%) and consumer goods (+1.46%) sectors were the top gainers, while property (-0.87%) and basic industries (-0.80%) fell.

IDR ended slightly weaker at 12,149 per US$.

IMF Upgrades

IMF has raised its forecast for global economic growth from 3.6% to 3.7% this year. Stronger US growth is cited as the major factor behind the upgrade.

US is now seen growing 2.8% in 2014, upgraded from 2.6% seen in earlier forecast (October 2013).

For 2015, the world economic growth is expected at 3.9%.

Technically Speaking...

JCI broke through the barrier at 4,459 recent high as well as the 200-day EMA and finished at 4,477.49. 

Both RSI and stochastics indicators remained around the overbought area, whilst MACD held its position above the zero line. Volume however, has not been able to rise to new heights. This signals potential exhaustion. 

Next resistance area lies around 4,600-4,610. Fibonacci projection targets 4,700, however. On the downside, near-term support lies at 4,450-4,460, 4,400 and subsequently, 4,327 - a prior resistance now turned into support. Below 4,327 we also have support at 4,175 and 4,109.

Day Ahead

The upside potential remains intact for now. The index is expected to knock on the 4,600-4,610 resistance area where its bullish commitment will be tested. Should it pass, 4,700 awaits. Below 4,400 may drive the index approaching the lower 4,300 support area.

Click here to download the full update (PDF)

Morning Dew - 22 January 2014

Investments Broke Record

Stocks posted another gains as the JCI rose 0.47% to finish at 4,452.50.

Other than BKPM’s Direct Investments report, no particularly significant news nor economic data released on Tuesday. US data also stays soft until Thursday when the jobless claims report are to be released along with some housing data.

Property (+2.30%) and mining (+1.02%) sectors were the top gainers, while miscellaneous industries stayed weak as it fell lagged for another 0.75%. 

IDR ended slightly weaker at 12,122 per US$.

Record Direct Investments in 2013

Indonesia Investment Coordinating Board (BKPM) revealed that DI in Indonesia jumped 27% to IDR398.6T in 2013, beating the target of IDR390T. Domestic DI grew 39% (IDR128.2T) while the Foreign DI grew 22% (IDR272.6T)

For 2014, BKPM projected a 15% growth of DI (IDR456T), slower than prior periods but considered normal after a string of strong growth.

Technically Speaking...

JCI resumed its rise to end at 4,452 after reaching the intraday high at 4,457, just below the recent high of 4,459 where it bumped into the 200-day EMA. 

Both RSI and stochastics indicators remained around the overbought area, whilst MACD held its position above the zero line. 

Next resistance area lies around 4,600-4,610. Fibonacci projection targets 4,700, however. On the downside, support lies at 4,400 and subsequently, 4,327 - a prior resistance now turned into support. Below 4,327 we also have support at 4,175 and 4,109.

Day Ahead

The upside potential remains intact for now. The index is expected to knock on the 4,600-4,610 resistance area where its bullish commitment will be tested. Should it pass, 4,700 awaits. Below 4,400 may drive the index approaching the lower 4,300 support area.

Click here to download the full update (PDF)

Morning Dew - 21 January 2014

A Good Start

Stocks kick-started the week on a right footing as the JCI gained 0.44%. 

China’s economic data were mostly neutral as they were not far off from the consensus numbers. 

Agriculture (+2.63%) and infrastructure (-2.32%) sectors were the top gainers, while miscellaneous industries lagged (-0.95%). 

IDR ended slightly higher at 12,110 per US$.

China Growth Slowed

China’s 4Q GDP slowed to 7.7% (YoY) from 7.8%, while QoQ GDP also slowed to 1.8% from 2.2%. Initially, the consensus forecast GDP at 7.6% (YoY) and 2.0% (QoQ).

Industrial production also slowed from 10% to 9.7% (YoY) in December, but retail sales managed to stay strong at 13.6% in December (YoY) compared to 13.7% pace seen in November.

Technically Speaking...

JCI started the week inching higher to end at 4,436. The index recently had hit the high at 4,459 and bumped into the 200-day EMA. 

Both RSI and stochastics indicators remained around the overbought area, whilst MACD held its position above the zero line. 

Near-term, resistance lies at 4,459, while next resistance area lies around 4,600-4,610. Fibonacci projection targets 4,700, however. On the downside, support lies at 4,400 and subsequently, 4,327 - a prior resistance now turned into support. Below 4,327 we also have support at 4,175 and 4,109.

PGAS reached its target price at 4,600. The recommendation is now closed after it gained 7.23%.

Day Ahead

The upside potential remains intact for now. The index is expected to knock on the 4,600-4,610 resistance area where its bullish commitment will be tested. Should it pass, 4,700 awaits. Below 4,400 may drive the index approaching the lower 4,300 support area.

Click here to download the full update (PDF)

Morning Dew - 20 January 2014

In A Standstill

Stocks ended flat on Friday as lack of fresh catalysts put the market in a standstill.

Agriculture (-1.05%), misc. industry (-4.08%) and manufacturing (-1.07%) sectors were down at the end of the day.

IDR ended flat at 12,127 per US$.

TALF re-entered the IDX on Friday. The stock was previously delisted in 2009. Starting at IDR400, the stock finished at IDR411 at the end of the day. TALF which operates in packaging industry, was established in 1977.

Confidence Slipped

Confidence slipped in January in the US, according to the preliminary data from University of Michigan. The reading (80.4) was both less than consensus (83.5) and the December reading (82.5).

Elsewhere, industrial production slowed to 0.3% after it registered a 1% increase in November.

Housing starts fell in December by 9.8% after a strong gains of 23.1% in November. Building permits continued to slip in December, falling by 3% after 2.1% decline a month earlier.

Technically Speaking...

JCI finished flat on Friday. The index recently had hit the high at 4,459 and bumped into the 200-day EMA. 

Both RSI and stochastics indicators remained around the overbought area, but volume has been slipping a bit, indicating the recent weakness might have been some temporary correction. MACD held its position above the zero line despite it stalled at the moment. 

Near-term, resistance lies at 4,459, while next resistance area lies around 4,600-4,610. Fibonacci projection targets 4,700, however. On the downside, support lies at 4,400 and subsequently, 4,327 - a prior resistance now turned into support. Below 4,327 we also have support at 4,175 and 4,109.

Week Ahead

While JCI took a breather, the upside potential remains intact for now. The index is expected to knock on the 4,600-4,610 resistance area where its bullish commitment will be tested. Should it pass, 4,700 awaits. Below 4,400 may drive the index approaching the lower 4,300 support area.

Click here to download the full update (PDF)

Morning Dew - 17 January 2014

New Stocks on the Block

Three new debutants arrived at IDX: ASMI, CANI and BINA. ASMI gained 50% as the insurer settled the day at IDR405. Marine logistics operator CANI ended 19.5% higher while BINA, the second bank going public this year, finished the session with gains of 12.5%.

IDR fell again to end the day at 12,177 per US$.

JCI itself fell after a string of gains. Only two sectors ended up: agriculture (+0.84%) and mining (+0.03%). The high-flying finance sector took a 1.35% fall as profit-taking set in.

CPI Inched Higher

Jobless claims inched lower during the week ending Jan 4th. The reading of 325k was less than 328k expected initially.

US inflation at the consumer level inched higher. December’s numbers were 1.5% (YoY), with core was at the steady pace of 1.7% (YoY). Timid inflation may give some restrain to the Federal Reserve’s tightening campaign.

Technically Speaking...

JCI stepped back after a string of gains. The index recently hit the high at 4,459 and bumped into the 200-day EMA. 

Both RSI and stochastics indicators are entering the overbought area, but volume also on the rise, indicating the power of the rally. MACD has been up for four days in a row, also underlining the strength of the rally. Wednesday’s setback may serve as a temporary correction.

Near-term, resistance lies at 4,459, while next resistance area lies around 4,600-4,610. Fibonacci projection targets 4,700, however. On the downside, support lies at 4,400 and subsequently, 4,327 - a prior resistance now turned into support. Below 4,327 we also have support at 4,175 and 4,109.

Day Ahead

While JCI took a breather, the upside potential remains intact for now. The index is expected to knock on the 4,600-4,610 resistance area where its bullish commitment will be tested. Should it pass, 4,700 awaits. Below 4,400 may drive the index approaching the lower 4,300 support area.

Click here to download the full update (PDF)

Morning Dew - 16 January 2014

PNBS Debuted

The rally continued on Wednesday as JCI tracked the gains of global stock indices.

IDR slightly fell against the greenback, but kept most of its recent gains intact. The currency ended the session at 12,077 per US$.

PNBS (Bank Panin Syariah) fell on its first debut on the JCI. The stock was initially priced at nominal price at IDR100 and it settled the day down 3% at IDR97. PNBS is the first one to get listed this year. Next on the menu are PT Bank Ina Perdana,  PT Asuransi Mitra Maparya, and PT Capitol Nusantara Indonesia. Another one is the relisting of PT Tunas Alfin Tbk.

Manufacturing Soared, Inflation Edged Up

The gauge of US manufacturing sector soared to 12.51 in January. Empire manufacturing index was last seen at 2.22 in December. The jump surpassed the consensus on a wide margin (which was at 3.5).

US inflation at the factory stage inched higher in December. The Producer Price Index (PPI) rose 0.4% and 1.2% on month-on-month and year-on-year, respectively, while the core PPI rose 0.3% and 1.4% for month-on-month and year-on-year, respectively.

Technically Speaking...

JCI is on track to its target at 4,600-4,610 en route to 4,700.

The rally continued along with the rising volume, suggesting that strength of the rally. Also, the price has exceeded its 200-day EMA, suggesting that the bottom might have been in place at the moment. While RSI has entered the overbought area, there isn’t any sign of exhaustion so far.

Next resistance area lies around 4,600-4,610. Fibonacci projection targets 4,700, however. On the downside, support lies at 4,327, a prior resistance now turned into support. Below 4,327 we also have support at 4,175 and 4,109.

Day Ahead

As the JCI continued its rally, the index is seen gaining further despite potential corrective action on Thursday. Still, positive performances from both US and Europe are expected to buoy the mood, hence limiting the downside risk at the moment.

Click here to download the full update (PDF)

Morning Dew - 15 January 2014

New Hope

JCI soared, tracking gains from overseas and as US payrolls grew less than expected in December. This led the market to conclude that the Federal Reserve will not be on an aggressive tightening path in tapering its stimulus. Some clarity over the mineral law also positive as this removes the fog of uncertainties surrounding the issue.

Three interest rate-sensitive sectors were sharply higher. Property (+6.98%), finance (+5.45%) and basic industry (+4.11%).

Along with JCI, IDR also gained against the greenback. The currency ended the session at 12,047 per US$.

Mineral Ore Export Ban

The allowed minimum purity level for copper concentrate has been revised to 15%, which enables Freeport and Newmont to export theirs at least until 2017. Export volume will be limited according to he capacity of the planned smelters capacity for each respective miners. The original regulation ban the exports completely.

Nickel and bauxite ores exports remain banned as originally planned. For nickel pig iron, the purity level has been revised to 4% from 6%.

More details to be announced.

Technically Speaking...

JCI soared to end the session near 4,400.

Bullish divergence on MACD, RSI and stochastics suggest that the index is poised to go higher in the coming sessions. Volume was also, noticeably higher than prior sessions. 

Next resistance is at the 200-day EMA at 4,434 while subsequent resistance area lies around 4,600-4,610. Fibonacci projection targets 4,700, however. On the downside, support lies at 4,327, a prior resistance now turned into support. Below 4,327 we also have support at 4,175 and 4,109.

Day Ahead

JCI broke out of its consolidation range and soared to end near 4,400. While the rally looked overdone and the index seems to be prone to correction, the upside potential following the breakout, is considered promising. The market still awaits on more details regarding the implementation of the rule.

Click here to download the full update (PDF)

Morning Dew - 14 January 2014

Mining Ban Eased

The government decided that the ore mineral ban law will be implemented as scheduled. While there is an accompanying details on the regulation, these are to be announced later. It is likely that big miners such as Freeport and Newmont will be allowed to continue to ship copper overseas. There are also more than 60 miners that will be allowed to do the same because they have processed their ores.

The relaxation of the law should be seen positive even that this shows how unprepared the government was with the law.

IDR rose slightly against the greenback at 12,197 per US$.

Payrolls Growth Slowed

US nonfarm payrolls gained 74k in December, far less than the expected 197k and well below November’s addition of 241k. Unemployment rate dropped however, from 7% to 6.7% as more people left the labor force.

The less-than-expected reading was seen as positive for US stocks because this will provide argument that the Fed may want to taper off its stimulus slowly instead of aggressively. 

Technically Speaking...

Consolidation continues as the index remains stuck within the consolidation range between 4,100-4,300. 

JCI needs to take on 4,327 convincingly to set up a stronger rally while defending its support area around 4,100.  Slipping below 4,100 may risk another visit towards 4,000 en route to 3,837.  On the upside, another push above 4,327 could revive the index’s chance to return to 4,400.

Diminished volume has started to pick up, albeit slowly; MACD has curled back up and RSI is approaching the overbought area, again.

PGAS is in. Entry at 4,290 and stop set below 4,100 while target set at 4,600. At the end of the day, PGAS finished at 4,435, up 3.38%.

Week Ahead

JCI is seen consolidating further within the confines of 4,100-4,300 trading range on Friday. IDR stays as a negative for the index as the weaker it gets, the higher the odds for another rate hike to stabilize the currency. For global sentiment, the less-than-expected payrolls should dampened the odds that the Fed will move aggressively on its tapering.

Click here to download the full update (PDF)

Morning Dew - 10 January 2014

BI Kept Rates Unchanged

JCI was flat at the end of Thursday trading session. The market seemed to be waiting on the BI’s rate decision to be delivered just after the market closes as well as the clarity of the raw mineral ore ban which is set to be implemented on January 12th. Differing statements coming from the government officials suggests that the mining issue remains under discussion at the moment. 

After the market closed, BI announced that the benchmark rate was kept unchanged at 7.5% while the overnight lending facility and deposit facility rate (FASBI) were maintained at 7.5% and 5.75%, respectively.

IDR stays weak at 12,263 per US$.

Robust Retail

Indonesia retail sales accelerated to 14% in November 2013 compared to the same period a year earlier. It was the fastest pace since  July 2013. The sales were 1.5% higher than October 2013.

US economy is expected to add 197k nonfarm payrolls in December, less than 203k added in prior month. Unemployment rate however, is seen stuck at 7%. Both employment data are set for release on Friday night.

Technically Speaking...

Consolidation continues as the index is back into the middle of its prior consolidation range between 4,100-4,300. 

Near-term support is at 4,154, with near-term resistance is seen at 4,212.

JCI needs to take on 4,300 convincingly to set up a stronger rally while defending its support area around 4,100.  Slipping below 4,100 may risk another visit towards 4,000 en route to 3,837.  On the upside, another push above 4,300 could revive the index’s chance to return to 4,400.

PGAS is added to the reco list. The stock has formed a bullish divergence on its RSI curve and this points at a potential rise to as high as 4,600. Considering attractive risk-to-reward ratio, we favor entry at 4,270-4,290.

Day Ahead

JCI is seen consolidating further within the confines of 4,100-4,300 trading range on Friday. With the miners remain vulnerable over the uncertainties of mineral ore export ban, upside is seen limited. IDR is also a negative for the index as the weaker it gets, the higher the odds for another rate hike to stabilize the currency.

Click here to download the full update (PDF)

Morning Dew - 8 January 2014

Taken Hostage

JCI remained under pressure on Tuesday, sinking deeper towards 4,175.

Uncertainties over the implementation of mineral ore ban has taken the miners stocks hostage. The law is set to apply by January 12th 2014 but the government stays silent on whether there will be any intervention to revise it.

From the global front, the slowdown of service sectors in both US and China has hurt sentiment as well. Still, this is viewed as temporary as US should maintain its course on tapering while China is still seen posting decent economic performance.

IDR continues to be a source of concern as the currency continues to fall.

US Trimmed Deficit

In a rare occasion, US trade deficit has shrunk significantly in November. Initially forecast to be at –$40bn, the reading came in at -$34.3bn, compared to October’s data of -$39.3bn.

Sharp drop in oil imports was behind the reduction of deficit. US has become more domestically dependent on oil production, hence reducing its dependence on overseas producers.

Demand for foreign cars, parts and capital goods however, remain strong. Exports on the other hand, have been strong as well

Technically Speaking...

The fall at the start of the week brought the index back into the middle of its prior consolidation range between 4,100-4,300. 

Volume however, has been light during the last three sessions while MACD continues to tick down. RSI has returned to its mid-point around 50%, opening room for the next leg up.

Near-term support is at 4,154, with near-term resistance is seen at 4,212.

JCI needs to take on 4,300 convincingly to set up a stronger rally while defending its support area around 4,100.  Slipping below 4,100 may risk another visit towards 4,000 en route to 3,837.  On the upside, another push above 4,300 could revive the index’s chance to return to 4,400.

Day Ahead

JCI is seen consolidating further within the confines of 4,100-4,300 trading range on Wednesday. With the miners remain vulnerable over the uncertainties of mineral ore export ban, upside is seen limited. IDR is also a negative for the index as the weaker it gets, the higher the odds for another rate hike to stabilize the currency.

Click here to download the full update (PDF)

Morning Dew - 7 January 2014

Gas Relief, Miners Uncertainties

JCI extended its losses on Monday as the index sunk to end near 4,200. This week the new lot size and price fractions rules are started to apply. Given new trading environment, the market may enter a period of adjustment as traders adapt to the new rules.

Good news came from Pertamina as the proposed hike of LPG for 12kg canisters has been revised from earlier hike of IDR3,500 to IDR1,000. The decision is to be effective on Tuesday.

Uncertainties over the implementation of mineral ore ban has put pressure on miners. The law is set to apply by January 12th 2014 unless there’s a government intervention to revise it.

US Service Sector Slowed

ISM service index fell to 53 in December from 53.9, below the consensus number of 54.7. 

ADP employment data is set for release on Wednesday, while FOMC minutes will be released on the same day. Friday will see employment data coming from U.S. as nonfarm payrolls is back into focus. The recent Fed decision to start its tapering was linked to the development in the labor market which makes the data significant to weigh the next move from the Fed.

Technically Speaking...

The fall at the start of the week brought the index back into the middle of its prior consolidation range between 4,100-4,300. 

Volume however, has been light during the last two sessions while MACD continues to tick down. RSI has returned to its mid-point around 50%, opening room for the next leg up.

JCI needs to take on 4,300 convincingly to set up a stronger rally while defending its support area around 4,100.  Slipping below 4,100 may risk another visit towards 4,000 en route to 3,837.  On the upside, another push above 4,300 could revive the index’s chance to return to 4,400.

META is out as the reco got stopped out at 235.

Day Ahead

Sharp drop in commodity sectors such as agri and mining could be attributed to the worsening China’s PMI for service sector reading. The December’s index fell to 50.9 from 52.5. Still, this week JCI may be subdued by the new trading rules, uncertainties over the looming mineral ore ban as well as sinking IDR.

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Morning Dew - 3 January 2014

A Fine Start

No Santa rally, but the market headed into the New Year with a fine start. JCI posted decent gains, breaking its technical barrier at 4,282 (see the tech page for details).

Inflation and trade balance data were released on Thursday,  showing that inflation was in line with consensus while trade data was better than expected.

Globally, the Fed’s tapering campaign will be the theme as the market will speculate on when the central bank will finally raise its rates. We believe it will be some time around 2015.

Domestically, IDR weakening risks further deterioration of current account deficit (CAD), and may move the hands of BI to raise rates again this year. 

Inflation Hit 8.38% in 2013

December saw month-on-month inflation of 0.55%, taking the FY13 inflation at 8.38% year-on-year. Core inflation hit 0.45% (month-on-month) in December while the FY13 core was at 4.98%.

November exports were reportedly up 1.45% (M/M) vs. October to US$15.93b, while against November 2012 the exports fell 2.4%. Year-to-date (Jan-Nov 13) the exports were at US$165.57b, down 5.19% against the same period a year earlier. 

Technically Speaking...

JCI started the New Year with solid gains as the index approaches the resistance at 4,331. Ending the first trading day at 4,327 has put it just above the 50-day EMA. The question is will it be able to follow up the gains on Friday?

The nearest resistance 4,331 with 4,380 (100-day EMA) as the next, followed by 4,408. On the flip side, the support is seen at 4,308 (50-day EMA) with subsequent support at 4,282 (prior resistance).

MACD is holding above zero line so far, while the RSI has broken its mid-line resistance (50%) and on course towards the overbought area. around the neutral zone. The recent rally had triggered the failure swing pattern on the RSI, and this looks good for now.

Day Ahead

European and American indices have backed away from recent highs as profit-taking set it. This is likely to be the case for JCI on Friday. Note that starting next Monday (6/1/14) there will be adjustments on price fractions and lot size, which could trigger some positions adjustments on Friday in addition to risk of profit-taking as the JCI may track the U.S. stocks.

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