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Morning Dew 1 April 2020

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CRUDE OIL PRICE SHOT DOWN TO THE LOWEST LEVEL FOR 18 YEARS

More than 3 million people in the world are in quarantine territories and lockdown to reduce the spread of COVID-19. These policies cause global crude oil prices to be still under pressure and global crude oil demand will fall by 50%. On Monday trading (3/30) the global crude oil price reached its lowest level for 18 years. The lowest world crude oil price previously was in November 2002 (below US$20/barrel). According to Bloomberg commodities data (3/31), the price of Brent crude oil slipped to US$22.69/ barrel (-8.99%) while the price of West Texas Intermediate (WTI) crude oil was amounting to US$21.65/barrel (-5.76%). Besides, the war between oil Saudi Arabia & OPEC+ and Russia, also contributed to the weakening of global crude oil prices. The global crude oil prices are predicted to reach US$10/ barrel and the global crude oil consumption level may only be 50 million barrels/day.

 

The global crude oil supply is estimated to rise starting in April 2020. It is estimated to reach more than 7.2 billion barrels. While the global crude oil storage has also increased since January 2020. The U.S. oil consumption is more than 20% of global oil consumption. The Fed also lowered its interest rates in hopes of strengthening the dollar against other countries' currencies to increase oil demand weeks ago. The coronavirus pandemic has caused the global crude oil prices to drop to the lowest level (-20%) in history and feared to cause many drilling industries and oil companies not only in the United States but also in the rest of the world to go bankrupt. The latest news (3/30), President Donald Trump and President Vladimir Putin have agreed to meet and discuss world oil prices and production.

 

The decline in world crude oil prices for Indonesia may cause a decline in commodity prices such as palm oil (CPO) and coal. The Ministry of Energy of the Republic of Indonesia (ESDM) also stated that PERTAMINA’s average oil and gas production costs are currently increasing so the state-owned oil company may carry out efficiency and performance optimization strategies in the future. Indonesia government is estimated to lose a sizable tax from non-tax state revenue (PNBP), income tax (PPh) and also the oil & gas (oil and gas) tax. Going forwards, the decline in the global crude oil price may strongly affect the country export performance this year. Furthermore, if the global crude oil prices continue to decline throughout 2020, Indonesia's economic growth is projected to only grow below 4.5%.

 

JCI

On Tuesday trading session (3/31), JCI strengthened by +124.4 points (+2.82%) to 4,538. Trading volume reached 6.87 billion shares with a total transaction value of Rp7.92 trillion. Foreign investors posted a net sell of Rp53.3 billion, compounding the year-to-date foreign net sell to Rp10.3 trillion.

 

All sectors strengthened, led by consumer goods (+6.26%), manufacturing (+5.09%), and trade (+4.98%). Stocks supporting the JCI were UNVR (+12.8%), BRPT (+20.8%), and UNTR (+17.2%). In contrast, stocks weighing down the JCI were TPIA (-2.8%), BYAN (-4.6%), and BTPS (-6.6%).

 

U.S. NEWS  

On Tuesday trading session (31/03) U.S. stocks closed lower with the DJIA registering its biggest quarterly decline since 4Q1987 and the S&P 500 suffering its deepest quarterly drop since the 4Q2008 at financial crisis as growing concerns of the scale of the damage caused by the COVID-19 pandemic. The DJIA was down -1.84%, at 21,917.16, the S&P 500 was down -1.60%, at 2,584.59 and the Nasdaq Composite was down -0.95%, at 7,700.10. For the quarter, the DJIA lost -23.20% the S&P 500 fell -20.0%, and the Nasdaq shed -14.18%

 

U.S. Treasury yields end mostly higher, amid continued uncertainty around the scale of economic effect and duration of the COVID-19 pandemic. The benchmark 10-year notes fell 1/32 to yield 0.6726%. The two-year notes were 1/32 down, yielding 0.2358%. The 30-year notes fell 51/32, to yield 1.34%.

 

Oil prices closed mixed, finding some support after China reported strong manufacturing data rose to 52.0 in March from a record low of 35.7 in February, and after Donald Trump spoke with Russia about efforts to fight the spread of the COVID-19 pandemic and stabilize the energy markets. For the quarter, crude oil prices post the largest quarterly percentage drop on record, losing -66.5% for WTI and -65.6% for Brent. On Tuesday trading (31/03), Brent crude down -0.22%, to US$22.71/barrel and WTI crude rose +1.29%, to US$220.35/barrel.

 

MACRO UPDATE

GOVERNMENT WIDENS THE 2020's BUDGET DEFICIT TO 5.07% OF GDP

To counter the impact of COVID-19, President Joko Widodo (Jokowi) decided to widen the 2020 State Budget deficit from 2.5% to 5.07% of gross domestic product (GDP) by proposing an additional revision of the 2020 APBN expenditure and financing to the parliament of Rp405.1 trillion, from the previous Rp2,540.4 trillion to Rp2,945.5 trillion.

 

In detail, Rp75 trillion will be distributed for health expenses, such as the purchase of personal protective equipment, test kits, referral hospitals, incentives for doctors, other medical workers, ventilators and death insurance. Then Rp110 trillion for social safety nets (SSN) such as poverty alleviation programs for 10 million beneficiaries, shopping cards for 20 million families, pre-employment cards for 2.6 million recipients, waiver of electricity costs for a period of three months, food principal and logistical support. In addition, Rp70.1 trillion is for tax and stimulus incentives. Meanwhile, Rp150 trillion is for fans' economic recovery programs, including credit restructuring, guarantees and financing of the business world for six months

 

THE WORLD BANK SLASH INDONESIA'S ECONOMIC GROWTH TO 2.1%

With the widespread impact of COVID-19, the World Bank predicts that Indonesia's economic growth in 2020 will experience deep pressure so that it will only be able to grow by 2.1%. In detail, for growth in household consumption, the component that underpins Indonesia's economic growth, will decline very sharply this year, which is only 1.5% compared to last year's 5.2% growth. As for investment, it is not expected to experience growth this year or 0%, compared to last year's growth of 4.4%. Conversely, government consumption is expected to be a component that strengthens the Indonesian economy, it is estimated that government consumption growth will increase from 3.2% last year to 5% this year in line with various fiscal stimulus policy packages issued by the government. The World Bank also projects that Indonesia's export and import growth will continue to contract for two consecutive years in 2020, respectively by -2% and -7%, compared to last year's -0.9% and -7.7%. On the other hand, the current account deficit (CAD) is also projected to widen again from 2.7% of GDP in 2019 to 2.8% of GDP this year. Nevertheless, the World Bank assesses that Indonesia's economic growth will rebound with an average growth of 5.4% in the coming year 2021-2022. Improvement in economic growth is expected to occur in line with the recovery in aggregate global and domestic demand.

 

COMPANY UPDATE

BUMI’S COAL SALES GREW +9% (Y/Y)

In 2019 PT Bumi Resources, Tbk. (BUMI) recorded a strong coal sales volume of 87.7 million tons, up by +9% (Y/Y) vs. that of 2018 at 80.6 million tons. In detail, PT Kaltim Prima Coal and PT Arutmin Indonesia, both are BUMI’s subsidiaries, recorded a sales volume of 61.8 million tons (+12% Y/Y) and 25.9 million tons (+1.6% Y/Y), respectively. Moreover, BUMI’s net profit reached US$6.3 million, supported by the higher coal price by +13% (Y/Y) if compared with the price in 2018. This year, BUMI expects to report a sales volume of 90 million tons with a monthly sales of 7 - 7.5 million tons; but the target is still under review amid global uncertainties.

 

INCO LENGTHENED ITS ACQUISITION PERIOD

PT Vale Indonesia,Tbk. (INCO) officially lengthened its acquisition period to May 2020 from previously March 2020. Previously known, INCO agreed to divest 20% of its ownership to PT Indonesia Asahan Aluminium (Persero) or Inalum, obeying the Presidential Decree No. 77 2014. The Company said that the deferral is to mitigate risks stemming from recent global pandemic issues.

 

LPPF FASTENING ITS BELT

Amidst the pandemic of Covid-19 which is hammering the economy and hurting industry, PT Matahari Department Store, Tbk. (LPPF) takes quick actions by undergoing various saving strategies. After temporarily closing all of its stores nationwide and postponing the expansion of four new stores, LPPF management's was said to withdraw the recommendation of dividend payment for FY19 and ahead, and to review capital expenditure plan and non-essential operating expenses, including the curtailment of employee salaries at all level.

 

TECHNICAL OUTLOOK

JCI IS POSITIVE, WITH EXPECTED RANGE OF 4,400 to 4,700.

JCI closed higher at 4,538 with the Resistance hanging still at 4,545/628/900, while the Support lay still at 3,920/845. Stochastic, MACD, and RSI still positive. PSAR green dot already appears, while EMA 5, & 20 still in a dead cross pattern and waiting today confirmation to turn into golden cross pattern.

 

ICBP – Achieve

Support            8150

Resistance        11100

Target Price     10500

 

SIDO – Achieve

Support            900

Resistance        1280

Target Price     1200

 

BBNI

Support            2700

Resistance        7900

Target Price     7100

 

BBTN

Support            660

Resistance        1930

Target Price     1800

 

WEGE

Support            107

Resistance        290

Target Price     240

 

DMAS

Support            102

Resistance        296

Target Price     246

 

DISCLAIMER

This research report is prepared by PT MINNA PADI INVESTAMA SEKURITAS Tbk. for information purposes only and is not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. The report has been prepared without regard to individual financial circumstance, need or objective of person to receive it. The securities discussed in this report may not be suitable for all investors. The appropriateness of any particular investment or strategy whether opined on or referred to in this report or otherwise will depend on an investor’s individual circumstance and objective and should be independently evaluated and confirmed by such investor, and, if appropriate, with his professional advisers independently before adoption or implementation (either as is or varied).

 

Wed April 1Th, 2020

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