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.

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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.

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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.

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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.

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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.

Click here to download the full update (PDF)