BNIS Fixed Income Daily Report of August 16, 2019.
Bond Market Review (Thu, 15/8)
Indonesia’s bond prices closed lower yesterday along with the escalating pressures in global market. Most of Government bond yields increased by about 1 – 8 bps, in which, the 10-year Government bond yield inched up 2 bps to 7.45%. The IDR weakened slightly to IDR14,274/USD yesterday, compared to previous day’s closing level of IDR14,245/USD.
The outright trading volume of Government securities was recorded at IDR17.5 trillion yesterday, increasing from the Wednesday’s trading volume of IDR8.8 trillion, and higher than the year-to-date average daily trading volume of IDR14.6 trillion. FR0078 and FR0082 was the most actively-traded series in secondary market, with the trading volume of IDR4.4 trillion and IDR2.9 trillion. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR1.3 trillion yesterday.
Bond Market Preview (Fri, 16/8)
Indonesia’s bond yields are expected to move sideways today, along with mixed sentiments from external. Global investor’s optimism increased, after Hua Chunying, Chinese Foreign Ministry spokesperson, said that China hopes the US will continue the trade negotiation with China. This eased global investors’ concerns about the US-China trade war, after the US plans to impose another tariff on imported goods from China. Meanwhile, the release of the US retail sales data for the period of July 2019 stood at 0.7%, higher than the expectation of 0.3%. Philadelphia manufacture index data for the period of August 2019 also showed a higher than expected result of 16.8 vs 10.1. These sentiments were positively responded by the global market participants, and spur their appetite on the riskier assets, as can be spotted from the strengthening US stock indexes (Dow Jones +0.39% and S&P 500 +0.25%). These sentiments will also open the possibility of price strengthening in Indonesia’s bond market. However, a chance for a significant price strengthening will be curbed by persisting global market participants’ concern over the economy recession, after the signal from inverted yield curve in the US bond market.
Along with the possibility of limited price movement, then several government bonds series such as FR0077, FR0056, FR0059, FR0042, and FR0078 will be an attractive choices for the investors.
Economics and Indonesia Bond Market News
Indonesia’s trade balance recorded a deficit of USD63.5 million in July 2019, better than Bloomberg consensus which expect a deficit of IDR420.0 million. The July trade deficit was triggered by deficit on oil and gas sector of USD142.4 million, despite a surplus of USD78.9 million in non-oil & gas sector. Indonesia’s exports were recorded at USD15.45 billion in July 2019, climbed by 31.02% compared to the previous month’s figure. The higher exports in July 2019 was underpinned by the surging non-oil&gas exports by 25.33% to reach USD13.85 billion, as well as higher oil & gas exports by 115.19% to reach USD1.61 billion. China, US, and Japan were the main destinations for Indonesia’s non-oil & gas export with the contribution of 36.72% to total non-oil & gas exports in July 2019. On the other side, Indonesia’s imports value also increased last month, where the total imports reached USD15.51 billion in July 2019, rose by 34.96% compared to the previous month. The higher imports were driven by increasing import value both on oil & gas and non-oil & gas imports of USD35.0 million (2.04%) and USD3.98 billion (40.72%), respectively. Following last month’s deficit, Indonesia’s trade balance recorded a deficit of USD1.90 billion in 7M19, lower than deficit on the same period in 2018 of USD3.21 billion.
PEFINDO rating agency has affirmed the rating of idAAA for PT BCA Finance with the stable outlook. According to PEFINDO, the corporate rating reflects a very strong likelihood of support from the controlling shareholder PT Bank Central Asia Tbk (BBCA) due to the company’s position as BBCA’s core subsidiary, a very strong market position in the car financing business, and strong liquidity and financial flexibility. Yet, the rating is still constrained by the tight competition in the industry resulting in low margin strategy. PEFINDO also stated that the rating may be under pressure if there is a downward shift in PEFINDO’s view towards the level support from BBCA. As of June 2019, PT BCA Finance was owned by BBCA (99.6%) and BCA Finance Limited (0.4%).
PEFINDO rating agency has affirmed the rating of idAAA for PT Angkasa Pura I. At the same time, PEFINDO has also affirmed the rating of idAAA for the company’s bond I 2016 and the rating of idAAA(sy) for the company’s Sukuk Ijarah I 2016. The outlook for corporate rating is stable. According to PEFINDO, the corporate rating reflects strong government support fro Angkasa Pura I due to critical role of airports, a strong competitive advantage from its economy of service area, as well as stable profitability margin. Yet, the rating is still cnstrained by its high financial leverage in near to medium term. PEFINDO also stated that the rating could be downgraded if the rating agency views a reduction in Government support. As of June 30, 2019, the company was fully owned by Indonesian Government.