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Morning Dew 16 March 2020

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FED CUTS 75 BPS

US Federal Reserve has cut its federal funds rate by 75 basis points on Sunday to near zero. In yet another surprise move, the Fed also accompanied the cut with US$700b worth of assets purchases: US$500b in Treasuries and US$200b in agency-backed mortgage securities. Emergency lending rates for banks have been cut as well by 125 bps to 0.25% with the term of loans lengthened to 90 days. In addition, reserve requirement ratios for thousands of banks have been cut to zero.

 

The Fed’s move is aimed to shelter the US economy from the fallout of the coronavirus as the outbreak has harmed communities and disrupted economic activities in many countries, including the United States. Until it is confident that the economy has weathered the impacts of recent events and is back on track to achieve its maximum employment and price stability goals, the Fed will maintain the new target range for FFR to 0%-0.25% (vs. previous 1%-1.25%).

 

Late last week, Bank Indonesia has also lowered its GWM (Giro Wajib Minimum) on forex for conventional commercial banks to 4% from 8%, effective from 16 March 2020. This is aimed at lessening the pressure on IDR by increasing forex liquidity. Similarly, IDR GWM has been reduced as well by 50 bps, starting from April 1st for nine months and to be reviewed afterwards. BI also to increase the interventions on IDR in the DNDF, spot and SBN markets to minimize IDR volatility risk. Within a week, rupiah has weakened from Rp14,267 per US$ to Rp14,815 per US$. BI is set to hold its 2-day meeting on 18-19 March, and is likely to lower its 7D-RR from the current 4.75%, especially after the recent Fed’s cuts.

 

Despite both IDX and LQ-45 rebounded on Friday, both indexes still lost 10% and 12%, respectively over the course of last week. With companies allowed to conduct buybacks without having GMS first, rebounds are likely seen, especially from SOE stocks. Nevertheless, with the virus continues to spread domestically, the downside risk is likely to stay for now. Likewise, the global stock markets are still vulnerable despite Friday’s rebounds and recent Fed cuts, especially the hard-hit Europe. After all, rate cuts will not cure the virus, but rather lessening the pain suffered from the economic impact.

 

Support for IDX is seen at last week’s low of 4,639.91. Another drop below it will open an opportunity for a test for 4k support. Resistance is seen at recent gap area around 5,110-5,150. With the DJIA racking a massive gain on Friday and recent Fed cut, the upside is still on for IDX.

 

JCI

On Friday trading session (3/13), JCI ended higher by +11.8 points (+0.24%) to 4,907.6 after being temporarily halted for 30 minutes due to steep decline of -5%, Transaction volume was recorded at 7.4 billion shares with Rp9.5 trillion value, Foreign investors posted a net sell of Rp575.8 billion, resulting in the year-to-date accumulation of foreign net sale of Rp7.8 trillion,

 

The advancing sectors were led by infrastructure (+1.41%), finance (+1.10%), and consumer goods (+0.74%), whereas the retreating sectors were mainly led by basic industry (-3.45%), agriculture (-2.08%), and miscellaneous industry (-0.96%), Stocks supporting JCI  were BBRI (+3.0%), BBCA (+1.8%), and UNVR (+3.8%), On the other hand, stocks weighing down JCI were TPIA (-6.8%), HMSP (-2.6%), and GGRM (-5.5%).

 

U.S. NEWS  

U.S. stocks surge as investors take encouragement from the White House’s new measures such as further monetary and fiscal stimulus after Donald Trump declares national emergency amid coronavirus pandemic. The DJIA 9.36%, to 23,185.62, the S&P 500 gained 9.29%, to 2,711.02 and the Nasdaq Composite added 9.35%, to 7,874.88. For the week, the S&P 500 fell 8.9%, the Dow dropped 10.4%, the Nasdaq declined 8.2%.

 

U,S, Treasury yields rose, the benchmark 10-year notes were up 0.99%, with the price falling 1-12/32. The 30-year yields were 1.58% higher at the price of 4-16/32. On the short end of the curve, the 2-year notes were down 2/32, yielding 0.51%.

 

Oil prices post biggest weekly percentage drop since 2008 global financial crisis, for the week, WTI fell 23%, while Brent lost 25%. For Friday trading session, Brent crude rose +5.27%, to US$34.97/barrel and WTI crude up +5.78%, at US$33.32/barrel.

 

COMPANY UPDATE

DEWA WILL HANDLE A NEW MINING PROJECT IN NORTH SUMATRA

PT Dharma Henwa Tbk (DEWA) will manage a new project section III, lead-zinc mine, in North Sumatra in june 2020 which valued amounting to S$23,504,533 pada juni 2020, This mine is owned by PT Dairi Prime Mineral (DPM) which will be worked on for 12 months after DEWA & DPM sign the contract, DEWA also received additional work on the construction of gabion retaining wall as well as mine roads & site leveling at lead-zinc mine in North Sumatra.

 

ACES WILL OPEN A NEW OUTLET IN MOJOKERTO

PT Ace Hardware Tbk (ACES) will open a new outlet akan membuka gerai baru on March, 2020 in Mojokerto, East Java, It is the fourth outlet in 2020, As of march 2020, The total number of outlets owned by ACES reaches 201 outlets.

 

TELE WILL ISSUE A NEW BOND

PT Tiphone Mobile Indonesia Tbk (TELE) will offer Tiphone II Phase III Sustainable Bonds in 2020 phase  III - 2020 amounting to Rp300B (Maximum Amount), The first public offering period will take place on March 26, 2020 dand be distributed on March 31, 2020, The first interest payments will be made on June 30, 2020 while the final interest payment  will be on March 31, 2023, TELE will use all funds to pay bilateral debt (40%) & working capital, The issuer of this bond is PT Bahana Sekuritas, As of 3Q19, total consolidated liabilities reached Rp4,94T with outstanding bonds of Rp841M. 

 

TECHNICAL OUTLOOK

JCI IS NEGATIVE, WITH EXPECTED RANGE OF 4,760 to 5,040.

JCI was closed higher at 4,907. PSAR red dot still appeared along with EMA 5, 20&50 still in dead cross pattern. MACD, RSI, and Stochastic still negative along with the Candlestick breached the lower Bbline. The Support lays at 4,790/690 while the Resistance hanging still at 5,230/290/750.

 

ACES

Support            1440

Resistance        1890

Target Price      1800

 

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).

Mon March 16Th, 2020

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