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The global bond market was shocked by the Bank of England’s (BOE) decision to raise its benchmark interest rate by 50 bps to 5%, with another 2X25 bps hike in 3Q23 (see global economic news) as well as growing speculation of Fed's terminal rate hike by 2X25 bps in 2H23. The speculation was sparked by the Fed Chair Jerome Powell’s testimony before the United States Congress. As a result, the S&P index for developed bonds fell -0.3% last night (6/22). The UST and Bund 10Y yields rose 8 and 6 bps to 3.79% and 2.49%, respectively. This could put pressure on the domestic bond market (10Y INDOGB yield slipped -2bps to 6.29% on Thursday (6/22). We expect the 10Y INDOGB yield to stay within the range of 6.3-4% today. Meanwhile, rupiah might depreciate further, though we believe that BI will still intervene to maintain exchange rate at IDR 14,900-15,000 per USD.
Fixed Income News: Pefindo downgrades its rating for WSKT's Shelf Registration Bond 3 phase 2 to (id)D. This decision was taken due to PT Waskita Karya's high default potential for payment of bond principal and coupons dated June 16, 2023 within the grace period of 14 working days. PT Pemeringkat Efek Indonesia maintains its rating for WSKT’s Shelf Registration Bond IV rating at (id)D and WSKT's overall rating at (id)SD. (Pefindo)
Global Economic News: BOE shocks the market with a 50 bps rate hike to 5% (May: 4.5%; Cons Jun: 4.75%). The hike, which was larger than expected, was mainly caused by the release of UK CPI inflation data for May (8.7% yoy; Apr: 8.7% yoy; Cons May: 8.4% yoy). In our opinion, the Bank of England (BOE) will still raise its benchmark interest in 3Q23 by at least 2X25 bps to 5.5% in August and September. (Reuters)
Domestic Economic News: Lackluster 2W EV sales of 800 units (April-June). The figure is far lower than the government subsidy target for FY23 of 200,000 units. According to Aismoli (Indonesian Electric Motorcycle Industry Association), the low sales figure was mainly caused by the very restrictive criteria for the subsidy, which only allows recipients of people's business credit (KUR) recipients, wage subsidy assistance, and electricity subsidies of up to 900 VA to receive the 2W EV subsidy. At the moment, the government has no plans to revise the 2W EV subsidy policy. (Kontan)
Recommendation: FR0067, FR0076, FR0089, FR0081, FR0040, FR0084, FR0086, PBS017.
Samuel Sekuritas Indonesia is a leading Indonesian securities brokerage firm. Established in 1997, the firm has grown to become one of the most respected and trusted financial services companies in the country. With a wide range of services and products, Samuel Sekuritas Indonesia has become a trusted partner to many investors, both institutional and individual.
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