Bank Indonesia sees a Room to Cut BI 7-DRR again this year - Photo by BI Office

JAKARTA (TheInsiderStories) – Good morning! Bank Indonesia sees the room is still open to lowering its benchmark rate again in this year, after cut seven days repo rate 25 basis point yesterday (07/18). The central bank’ first cut since September 2017, may just be the beginning of an easing cycle that could push the rate down to 5 percent by the end of the year, according to Morgan Stanley.

Yesterday, Bank Indonesia decided to reduce its 7-Day Reverse Repo Rate (7-DRR), Deposit Facility interest rate, and Lending Facility interest rate by 25 bps from to 5.75 percent, 5.0 percent, and 6.5 percent, respectively.

From abroad, British lawmakers backed proposals for the next prime minister to force through a no-deal Brexit by suspending parliament to stop a divorce from the European Union (EU) without a deal. Boris Johnson, the clear frontrunner to succeed Prime Minister Theresa May has said Britain must leave the EU on Oct. 31 with or without a deal.

By these, Britain may enter a massive recession that the release of an agreement from the EU will only blow a hole of GBP30 billion (US$37.50 billion) in public finance and could cause the economy to contract by 2 percent by the end of 2020.

Yet, new EU chair Ursula von der Leyen revealed she would think to give Britain an extension for talks on the exit from the EU if London gave good reasons. The organization will first wait for Britain’ new prime minister to be elected on July 23 and then seek to talks.

Yesterday, International Energy Agency said would reduce its 2019′ oil demand forecast due to the global economic slowdown and United States (US) and Chinese trade friction to 1.1 million barrels per day (MBOPD) from 1.2 MBOPD in June, and could cut it again if the global economy continues to show further weakness.

US’ oil output is expected to grow 1.8 MBOPD by 2019, which will be slower than the 2.2 MBOPD in 2018. While, Middle East tensions, especially around the Strait of Hormuz, a vital shipping routes that connect Gulf oil producers to markets in Asia, Europe, North America, and other places are also a concern.

On Thursday, global stocks slipped amid growing signed that a trade dispute between the US and China had taken its toll on corporate earnings. Global unrest has intensified after President Donald Trump on Tuesday maintained pressure to charge another $325 billion in Chinese goods.

The worries also come from a slump in Japanese exports to the US 6.7 percent in June, while manufacturing confidence fell to a three-year low in July, on the back of trade tensions and slowing Chinese growth. Moreover, Eurozone government bond yields fell after a report by the European Central Bank, which also pushed the single currency down 0.1 percent to lows on Thursday at $1.1205.

The economists expected the ECB to open the door for a September rate cut of 10 basis points in next week meeting. ECB’ Governing Council will meet July 24 in Frankfurt, after June’ inflation data higher than expected at 1.3 percent, but below the central bank’ target level of just under 2 percent.

Ministers from the main G7 countries reached a consensus towards an agreement on giant digital taxes, a problem that has divided the US and its allies Britain and France. French Finance Minister Bruno Le Maire, who hosted a two-day meeting in Chantilly, said finance ministers and central bank governors had reached an agreement for first “tax activities without a physical presence, especially digital activities”.

G7 ministers have far less difficulty agreeing to positions on new crypto currency such as Libra Facebook, saying the new and untested digital money risks destabilizing the international monetary system and is not ready to be implemented.

While uncertainty over the progress of the US – China trade deal and the increasing US and Trump pressure on Beijing. The pace of companies that move production from China is accelerating as more than 50 multinational companies from Apple to Nintendo rush to avoid the US penalty rates. Following increasingly intenses fighting, more and more companies announced plans or were considering diverting production from China.

From the country, State-Owned Enterprises (SOE) ministry said there are five-publicly listed under the ministry asked to hold an Extraordinary General Meeting. The SOEs are PT Bank Mandiri Tbk (IDX: BMRI), PT Bank Negara Indonesia Tbk (IDX: BBNI), PT Bank Tabungan Negara Tbk (IDX: BBTN), PT Bank Rakyat Indonesia Tbk (IDX: BBRI) and PT Perusahaan Gas Negara Tbk (IDX: PGAS).

Meanwhile, PT Permodalan Nasional Madani will get an injection of funds from state capital participation of Rp2 trillion (US$142.86 million) in the 2020 State Budget. Furthermore, PT Pertamina reportedly have talked with government to gets a 30 percent stake in the Corridor block in South Sumatra, one of the country’ largest gas blocks.

The current contract for the block expires in 2023. Pertamina currently has a 10 percent stake in the block, while PT ConocoPhillips Indonesia controls 54 percent and Spanish energy company Repsol has 36 percent. As of June, the Corridor block is the second-biggest gas producer with 827 million metric standard cubic feet per day of gas or 148,000 barrel of oil equivalent per day.

Then, PT Astra International Tbk (IDX:ASII) and Indonesian ride-hailing firm GOJEK launched a four-wheel mobility solution with the brand name GOFLEET. The new unit is a specialized rental transportation service provider that provides quality solutions for drivers of the door to door online transportation service drivers in Indonesia, in the form of vehicle provision, maintenance, repair services, insurance protection, and vehicle monetization through advertising.

Indonesia will start producing electric vehicles (EV) in 2022, after a number of companies revealed plans to invest in this sector. Companies such as Japan’ Toyota Motor Corp and South Korea’ Hyundai Motor have expressed their interest in building EV factories in Indonesia. Toyota has committed to invest $2 billion over the next five years.

Following up on President Joko Widodo’ instructions, Energy and Miniral Resources ministry assured that the construction of four of the 12 Waste Power Plants will be completed this year, namely those in Surabaya, Jakarta, Bekasi, and Solo. The plants will be able to produce up to 234 megawatts. The total value of the twelfth investment in the power plant is $1.18 billion.

Yesterday, the Jakarta Composite Index (JCI) entered the green zone and closed up 0.14 percent or 8.69 points to 6,403.29. Rupiah also closed higher in the spot market to 13,960 against the US dollar, up 0.16 percent compared to previous day.

For today, profit taking will haunt the financial market. Analysts sees Rupiah will move in the range of 13,850 to 14,030 over the Greenback. While, Binaartha Sekuritas analyst Nafan Aji said, the interest rate policy would still affect the JCI movement today. He estimates the JCI move with support at 6,363.75–6,383.52 and resistance at 6,415,16–6,427.03.

Moreover the stock to watch on Friday namely PT AKR Corporindo Tbk (IDX: AKRA), PT Pakuwon Jati Tbk (IDX: PWON), PT Sri Rezeki Isman Tbk (IDX: SRIL), PT Kalbe Farma Tbk (IDX: KLBF), PT HM Sampoerna TBk (IDX: HMSP), PT Gudang Garam Tbk (IDX: GGRM), and PT Bank Central Asia Tbk (IDX: BBCA)

US$1: Rp14,000, GBP0.80

May you have a profitable weekend!

Written by Linda Silaen and TIS Intelligence Team, Please Read Our Insight to Get More information about Indonesia