Monthly Review - August 2014

MARKET ISSUES

The Seventh President

As Constitutional Court (MK) rejected claims from Prabowo-Hatta on the election dispute, Joko Widodo & his running mate, Jusuf Kalla are set to be the next president and vice president when they are inaugurated in October. The pair won almost 71 million votes (53.15%) against Prabowo Subianto – Hatta Rajasa’s total tally of 62.5 million votes (46.85%). Despite the win, Jokowi will face a tough start of his presidency later on when the new government will be faced with the dilemma of fuel subsidy. Now that the current government has rejected to raise the fuel price, it will be the next one who will have to pull the trigger. Jokowi insists that the subsidy should be reduced and that the spending should be redirected to other uses such as to promote education, health and infrastructure projects.

Growth Slowed

The economy has slowed in the second quarter 2014. GDP growth slowed to 5.12% from 5.21% (1Q14), while the trade balance has swung back to deficit. In June, the balance was recorded at US$300 million of deficit, bringing the first six months trade balance to a deficit of US$1.16b. Inflation was muted however, as the statistical impact of CPI spike due to fuel price hike has waned. As there is no imminent threat on the inflation side and no significant slowdown of GDP growth, Bank Indonesia has decided to stay put and kept rates unchanged.

MBSS Saga

MBSS was sent to the suspension bin in mid-August when Great Dyke brought the company to the PKPU regarding an unsettled debt worth US$2,932,635. The matter was solved after MBSS paid the debt on August 15th. The amount paid has no significant impact on the company’s financial as its cash position was very much adequate to settle the debt. Trading suspension was later revoked.

Cement Sales Down, HBA Fell Again

Cement sales fell in July as Idul Fitri holiday dent construction activities. Sales are expected to recover in subsequent months. ASI’s forecast stays between 4% to 5% growth in sales in 2014. Elsewhere, HBA fell for another 2.98% to US$70.29 per ton from US$72.45 per ton (July). According to Ministry of Energy and Mineral Resources, coal production is likely to be capped at 425 million ton per year.

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Morning Dew - 29 August 2014

Stumbling Block

The incoming president Jokowi is likely to start off his term with one unpopular decision: to raise the fuel price. The move is deemed important to reduce the heavy burden that the government has to bear which has led to scarcity of fuel recently. While distribution has been normalized, under a tight supply of fuel there is no guarantee that such thing will happen again.

According to Jokowi, he had asked the current president, SBY to reduce the burden by raising the fuel price earlier before the new government starts to rule, but this request was said to have been rejected. A reduced subsidy on fuel is expected to open up possibilities to channel government spending on other needs such as infrastructure, healthcare and education.

Amidst all that, JCI attempted once more on Thursday to take on the resistance at 5,200 mark, but still with no success in settling the daily closing price above it.

Elsewhere in the U.S., hackers were reportedly managed to hack into JP Morgan Chase’s computer system.

USDIDR was down at 11,682 on Thursday compared to Wednesday’s settlement at 11,708.

BJBR, U.S. GDP

Pefindo has revised BJBR’s rating prospect to negative from stable. The weakening of the asset quality and company’s profitability indicators have been the factors behind the revision.

From the U.S., the 2nd quarter GDP was reportedly up by 4.2% (yoy) vs. 4.0% initially reported. Upward revisions hinged on business spending and exports. Meanwhile, U.S. jobless claims were down 1k to 298k last week. 

Technically Speaking...

JCI continues to struggle to break through the 5,200 barrier as the index launched another attack on Thursday.  No clean break so far however, as the day ended at 5,184.48.

As for now, JCI is aiming to secure its ground above 5,200 and subsequently the focus will turn to the next resistance at 5,251, the all-time record high while near-term supports are seen at 5,150-65 (congestion area) and then 5,135, the former lower consolidation band, 5,039 and 5,000, followed by 4,950, the former EMA-50 resistance now turned as support. 

MACD has swung back to negative area whilst RSI has pop up above the 70% mark.

ADRO, SMRA and WSKT recos are still awaiting their entry prices to be filled. Please check the details on the table below.

Day Ahead

Fuel price has become a new catalyst which can put a dent on the JCI’s chance to rally in the short-term, but on the long-run it could have somewhat a more positive impact on the index. Other than fuel price, the cabinet composition to work under Jokowi’s leadership will be also another wildcard for market mood in the near-term. Better-than-expected US GDP for 2Q14 should also lend support to the market mood.

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Morning Dew - 26 August 2014

Slow Start

A quiet start of the week, the JCI drifted lower to end at 5,184.96. Lack of immediate catalysts have triggered more profit taking among investors.

The market currently awaits for the naming of ministers in the Jokowi-JK’s cabinet following the Constitutional Court’s dismissal of election results’ challenge brought in by Prabowo-Hatta’s side. More politics are seen in the mix during the process of lining up the ministers, but whether Jokowi’s final lineup will truly impress the market or not will remain to be seen.

On the international front, the geopolitical tensions in the Middle East and Ukraine remain a drag for market sentiment, as well as the recent statement from the FOMC minutes that the end of low interest rates environment is to come sooner rather than later as employment outlook continues to improve.

USDIDR was back up at 11,714 on Monday compared to Friday’s settlement at 11,654.

MDLN, CPGT

A big chunk of land in MDLN’s Cikande area of about 110ha was reportedly bought by a Thai beverage company. The buyout also include an option to buy another 190ha in 2015 and 2016. The deal is expected to fulfill MDLN’s industrial land sales target of 100ha per year for the next two years.

CPGT through its recent RUPSLB has decided to revamped the entire BOD and Commissioners following a fraud investment case involving former management. In a move viewed as a hostile takeover, the shareholders rejected the company’s financial report for 2013, leading to more drama to unfold.

Technically Speaking...

JCI drifted lower below 5,200. Still, the index is just within spitting distance to reclaim its all-time high at 5,251. 

As for now, JCI is aiming to secure its ground above 5,200 and subsequently the focus will turn to the next resistance at 5,251, the all-time record high while near-term supports are seen at 5,150-65 (congestion area) and then 5,135, the recent lower consolidation band, 5,039 and 5,000, followed by 4,950, the former EMA-50 resistance now turned as support. 

MACD continued to tick up into the positive area whilst RSI has started to stall around the overbought area.

ADRO, SMRA and WSKT recos are still awaiting their entry prices to be filled. Please check the details on the table below.

Day Ahead

Beyond the Court is the naming of the ministers, the first test for Jokowi-JK’s commitment to form a strong but non-transactional government. Recent Federal Reserve Minutes should provide support for the market as the central bank has further started to prepare the market for the first rate rise after the Fed’s easy money policy era.

Click here to download the full update (PDF)

Morning Dew - 25 August 2014

Taking A Breather

JCI took a breather on Friday as the advance stalled around 5.2k following the final verdict from Constitutional Court which put an end to the election dispute.

As noted some time ago, the next after the Court’s verdict will be the forming of the new cabinet. Who will be appointed as ministers will be the first test for Jokowi-JK’s commitment over a professional, rather than transactional cabinet composition.

Elsewhere, despite recent comment from Janet Yellen that slack remains in the labor market even after recent improvements and economic recovery, the recent 

Federal Reserve Minutes of their last FOMC meeting showed that the central bank has raised the odds that stimulus will end sooner than anticipated.

USDIDR was down at 11,654 on Friday compared to Thursday’s settlement at 11,717.

BUMI, MAGP

BUMI’s bondholders have agreed the key terms for proposed restructuring  of $375 million convertible bonds due in August. According to the director Dileep Srivastava, more than 98% of the bondholders are in favor of the terms.

MAGP reported a net sales worth Rp72,298.10 million in 1H14 vs Rp19,262.28 million (1H13), but its net profit showed a loss of Rp11,362.54 million vs. a profit of Rp3,192.56 million (1H13). EPS fell sharply from Rp0.19 per share to Rp-18.74.

Technically Speaking...

JCI continued seesaw around 5,200, but fell short of closing above it. Still, the index is just within spitting distance to reclaim its all-time high at 5,251. 

As for now, JCI is aiming to secure its ground abot 5,200 and subsequently the focus will turn to the next resistance at 5,251, the all-time record high while near-term supports are seen at 5,150-65 (congestion area) and then 5,135, the recent lower consolidation band, 5,039 and 5,000, followed by 4,950, the former EMA-50 resistance now turned as support. 

MACD continued to tick up into the positive area whilst RSI has started to stall around the overbought area.

ADRO, SMRA and WSKT recos are still awaiting their entry prices to be filled. Please check the details on the table below.

Week Ahead

Beyond the Court is the naming of the ministers, the first test for Jokowi-JK’s commitment to form a strong but non-transactional government. Recent Federal Reserve Minutes should provide support for the market as the central bank has further started to prepare the market for the first rate rise after the Fed’s easy money policy era.

Click here to download the full update (PDF)

Morning Dew - 22 August 2014

Final Verdict

The Constitutional Court has rejected all lawsuits brought on by Prabowo-Hatta on the election dispute saga, hence effectively ended the legal path for Prabowo to negate the KPU’s decision to declare Jokowi-JK as the winner of the 2014 presidential election.

While dissatisfaction has been expressed by the Prabowo-Hatta’s side after the Court’s verdict, Prabowo’s supporting parties stated that they remain committed to stay within the coalition and said that the coalition may be taking further legal steps and continuing its political efforts. No details were explained over what kind of steps or efforts were meant.

Recent Federal Reserve Minutes of their last FOMC meeting showed that the central bank has raised the odds that stimulus will end sooner than anticipated.

USDIDR was marginally higher at 11,717 on Thursday compared to Wednesday’s settlement at 11,707.

Supports from Data

China HSBC Manufacturing PMI ticked down in August to 50.3, worse than the expected 51.5 and lower than  July’s  51.7.

US Manufacturing PMI for August beat the consensus and stood at 58.0 against 55.8 seen in July. Consensus forecast was at 55.7.

US Existing Home Sales were up 2.4% in July (MoM), defying consensus forecast of a 0.5% drop..

Philadelphia Fed Index was higher at 28.0 in August vs. 23.9 seen in July.

Technically Speaking...

JCI pushed higher on Thursday as the index broke the 5,200 barrier, just within spitting distance to reclaim its all-time high at 5,251. 

As for now, focus will turn to the next resistance at 5,251, the all-time record high while near-term supports are seen at 5,150-65 (congestion area) and then 5,135, the recent lower consolidation band, 5,039 and 5,000, followed by 4,950, the former EMA-50 resistance now turned as support. 

MACD continued to tick up into the positive area whilst RSI has started to inch higher towards the overbought area while volume slipped slightly on Thursday.

ADRO, SMRA and WSKT recos are still awaiting their entry prices to be filled. 

Day Ahead

Constitutional Court has cast its verdict over the election dispute and thus clears the fog of uncertainties surrounding the political atmosphere. The verdict should be market-friendly and may become the catalyst for the index to rise higher. Solid string of data from the U.S. is also seen lifting up market sentiment on Friday.

Click here to download the full update (PDF)

Morning Dew - 20 August 2014

Taking A Pause

JCI continued to take a pause around the resistance at 5,165 as the verdict from MK is expected tomorrow. 

Lack of key issues or data have left the Constitutional Court’s decision this week as the major factor to shape the market’s sentiment. Most market participants have been betting that Prabowo-Hatta may fail at the MK stage and that Joko Widodo is likely to be the winner of the last election. 

Another factor to be considered by investors is the Fed Minutes of the most recent FOMC meeting which would reveal or at least, hint on how soon the Fed will raise rates after the stimulus program ends sometime in the fourth quarter.

USDIDR was marginally higher at 11,682 on Tuesday compared to Monday’s settlement at 11,681.

US Inflation Update

US Core CPI was up 1.9% (YoY) in July, unchanged from June. The month-on-month figure was also steady at 0.1%.

Headline inflation slowed to 2% from 2.1% (YoY) and 0.1% from 0.3% (MoM).

Timid inflation may provide a case for the Fed to maintain its easy monetary policy for now, giving a boost for US stocks to rise on Tuesday.

Meanwhile, housing starts were robust in July as construction jumped 15.7% from a month earlier.

Technically Speaking...

JCI continued to consolidate its gains near 5,165 resistance while briefly hit 5,178 on Tuesday.

As 5,165’s role as resistance has been continuously eroded,  focus now turns to subsequent resistance at 5,251, the all-time record high.

Near-term supports are seen at 5,135, the recent lower consolidation band, 5,039 and 5,000, followed by 4,950, the former EMA-50 resistance now turned as support. 

MACD continued to tick up into the positive area whilst RSI seesaw near the overbought area and volume also gained on Tuesday.

ADRO, SMRA and WSKT recos are still awaiting their entry prices to be filled. Please check the details on the table below.

Repeat: MBSS has been unsuspended and trading returns to normal.

Day Ahead

Lack of catalysts have pushed the index towards a listless trade on the start of the week. The end of election dispute is expected in midweek and the odds favor the election result to remain unchanged. In such case, we may move on to the next issue: the cabinet. Elsewhere, global investors may set their sights on the release of Fed Minutes of the recent FOMC meeting.

Click here to download the full update (PDF)

Morning Dew - 18 August 2014

CAD Expanded

Current account deficit (CAD) has expanded in the 2Q14 to US$9.1billion or 4.27% of GDP. In prior quarter the CAD was at 2.05% of GDP while compared to the same quarter a year earlier it was at 4.47% of GDP. 

For the next two quarters, the BI Governor expects CAD to fall as exports of mineral-ore to resume after some large miners have struck an agreement with the government. For 2014, CAD is expected to be around 3% of GDP or around US$27bn, which is lower than US$29bn (3.3% of GDP) seen last year.

JCI ended down on Friday as profit taking continued, sending the index to finish 6.5 points lower or 0.1% below Thursday’s close.

USDIDR inched higher and finished Friday’s session at 11,693 per US$ from 11,667 per US$ on Thursday.

MBSS Press Release

Concerning the recent suspension of MBSS, the matter has been solved as Great Dyke has withdrawn the case from PKPU after the amount claimed has been paid on August 15th. The payment worth US$2,932,635.

According to MBSS, there is no crucial impact on the company over the case settlement, and as the case has been settled, the suspension on the stock should be revoked early next week.

Technically Speaking...

JCI broke through the 5,165 resistance last week, but failed to hold on to its gains as the index slipped back below 5,165.

Near-term, 5,165 is still considered as resistance, although its significance has been reduced. Subsequent resistance lies at 5,251, the all-time record high.

Near-term supports are seen at 5,165, the recent key resistance turned support, 5,039 and 5,000, followed by 4,950, the former EMA-50 resistance now turned as support. 

MACD has ticked up into the positive area after a string of declines into the negative area.  RSI has turned lower again after several failed attempts to move higher while volume also inched lower on Friday.

ADRO, SMRA and WSKT recos are still awaiting their entry prices to be filled. Please check the details on the table below.

Week Ahead

Indonesian political drama is supposedly set for a closing finale as MK will deliver its decision on midweek. It is expected that there will be no change in the election result, while on the least likely scenario is the repeat of the election. If election dispute is to be settled once and for all next week, the next attraction point will be who will sit in the cabinet.

Click here to download the full update (PDF)