The JCI July 21, 2020

Jᴜʟʏ 21, 2020

* Tʜᴇ JCI ᴛʀᴀᴅɪɴɢ ʀᴀɴɢᴇ: 5,000ᴘᴛ – 5,150ᴘᴛ   (Yᴇsᴛᴇʀᴅᴀʏ ᴄʟᴏsᴇ: 5,051ᴘᴛ)

* Wᴀʟʟ Sᴛʀᴇᴇᴛ ᴇᴅɢᴇᴅ ʜɪɢʜᴇʀ ᴏɴ ᴛᴇᴄʜɴɪᴄᴀʟ ʀᴇᴠᴇʀsᴇ

* Tʜᴇ JCI ɪs ᴇxᴘᴇᴄᴛᴇᴅ ᴛᴏ ʜᴀᴠᴇ ᴛᴇᴄʜɴɪᴄᴀʟ ʀᴇᴠᴇʀsᴇ ʙʏ sᴜᴘᴘᴏʀᴛ ᴏꜰ ʟɪǫᴜɪᴅɪᴛʏ ᴀɴᴅ sᴛᴀʙʟᴇ ᴏɪʟ ᴄʟᴏsᴇ

Morning,

The Jakarta Composite Index (JCI) today (21/7) is expected to be in the range of 5,000pt – 5,150pt to reverse by support of  lower BI7DRRR and stable oil close.   Meanwhile, yesterday (20/7) in Wall Street  the  DJIA  ended higher by  9 points or 0.03%  at 26,681pt,  while the S&P500 and the Nasdaq both gained by  0.9% and 2.5%, respectively.

𝐈𝐧𝐝𝐨𝐧𝐞𝐬𝐢𝐚 𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐒𝐞𝐜𝐭𝐨𝐫

𝐂𝐢𝐠𝐚𝐫𝐞𝐭𝐭𝐞𝐬 𝐜𝐨𝐧𝐬𝐮𝐦𝐩𝐭𝐢𝐨𝐧 𝐫𝐚𝐭𝐞𝐬 𝐚𝐫𝐞 𝐚𝐛𝐨𝐮𝐭 𝐬𝐢𝐦𝐢𝐥𝐚𝐫 𝐢𝐧 𝐞𝐚𝐜𝐡 𝐛𝐫𝐚𝐜𝐤𝐞𝐭 𝐨𝐟 𝐢𝐧𝐜𝐨𝐦𝐞 𝐠𝐫𝐨𝐮𝐩𝐬

Based on World Health Organization latest report on tobacco industry, Indonesia currently stands number 3 (three), at 60.2% level for smoking  rates for male aged 15 years and older, with Timor Leste stands on number 2 (two) for 65.8%, and Kiribati number 1 (one) for 68.6%.

This latest finding, although slightly improving (see our published report on March 4, 2019), is not surprising, and indeed consistent with domestically –conducted surveys.

As stated on our report yesterday, out of total national spending per capita consumptions in the amount of IDR1,205,862, consumers in urban areas used some 49% for food or around IDR593,450 per capita. According to the findings, food consumptions spending allocations for consumers in urban areas to include Prepared foods and drinks (40.0%), Cigarettes and tobacco (10.4%), Cereals (9.1%), Fish/shrimps/squid/shells (7.2%), Vegetables (6.7%), and Others (26.6%). Whereas, in rural areas, portion for Cigarettes and tobacco spending is higher at 13.8%, and being compensated by lower spending on Prepared foods and drinks (29.0%),  and higher spending on Cereals, Fish/shrimps/squid/shells,  and Vegetables.

Nevertheless, within  the 5 (five) classified income brackets designed by the central Statistic Office ( BPS or Badan Pusat Statitisk), the rates of spending on Cigarettes and tobacco does not bear significant different.  As for the lowest income bracket denoted by Quintile 1, Cigarettes and tobacco spending is at the amount 10.2%, Quintile 2 at 12.3%, Quintile 3 at 13.1%, Quintile 4 at 13.2%, and Quintile 5 at 10.2%, to wrap-up in an average of 11.7% of total spending. This is in contrast with the spending rates for Prepared food and beverages which call for 27.1% of total spending for consumers in income bracket of Quintile 1, 30.5% for Quintile 2, 32.8% for Quintile 3, 35% for Quintile 4, and 42.4% for Quintile 5.

The in-elasticity of demand for cigarettes among  the income brackets suggest that cigarettes industry be included as defensive sector. The sector being a defensive can also be proven by the 1Q20 major listed- cigarettes companies such GGRM, and HMSP. GGRM managed a 1Q20 YoY increase of 4% for Revenues, while HMSP to have posted almost flat growth of Revenues to IDR23.7tr vs. IDR23.8tr in 1Q19. Also, both companies  recorded flat growth bottom line in 1Q20 with GGRM at 2.4tr and HMSP at IDR3.3tr. 1Q20 saw less than the full quarter effect of an average excise rates increase by the government of 21.6% to take effect  this year (2019: none).

A solid industry since the pre-independence time, tobacco sector ( has gradually shifted and now be in an oligopoly condition) currently benefit from its role as an important excise revenue as well as employment contributors to the country.  With this situation, critics from anti-tobacco , health, children welfare, and other similar organizations provide challenges for the government in order to create the best circumstance for the economy.

At the other end, yesterday  the WTI price closed at USD40.8/barrel or an increase of 0.5% as compared to the previous one. Meanwhile the  USDIDR  closed  at IDR14.832  vs. IDR14.780 the previous one.

We advise the following recommendation as for now, for both trading and longer-time investment purpose. 𝐀𝐀𝐋𝐈, 𝐋𝐒𝐈𝐏 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘈𝘨𝘳𝘪, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘜𝘯𝘥𝘦𝘳𝘸𝘦𝘪𝘨𝘩𝘵 ), 𝐔𝐍𝐓𝐑, 𝐈𝐓𝐌𝐆, 𝐀𝐃𝐑𝐎, 𝐏𝐓𝐁𝐀 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘊𝘰𝘢𝘭 𝘔𝘪𝘯𝘪𝘯𝘨, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘔𝘢𝘳𝘬𝘦𝘵-𝘸𝘦𝘪𝘨𝘩𝘵), 𝐆𝐆𝐑𝐌, 𝐔𝐍𝐕𝐑, 𝐈𝐂𝐁𝐏 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘊𝘰𝘯𝘴𝘶𝘮𝘦𝘳, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘖𝘷𝘦𝘳𝘸𝘦𝘪𝘨𝘩𝘵 ), 𝐀𝐒𝐈𝐈 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘈𝘶𝘵𝘰𝘮𝘢𝘵𝘪𝘷𝘦, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘔𝘢𝘳𝘬𝘦𝘵-𝘸𝘦𝘪𝘨𝘩𝘵), 𝐚𝐧𝐝 𝐀𝐂𝐄𝐒, 𝐒𝐂𝐌𝐀, 𝐌𝐀𝐏𝐈 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘛𝘳𝘢𝘥𝘦, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘖𝘷𝘦𝘳𝘸𝘦𝘪𝘨𝘩𝘵),𝐚𝐧𝐝 𝐓𝐊𝐈𝐌 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘉𝘢𝘴𝘪𝘤 𝘐𝘯𝘥𝘶𝘴𝘵𝘳𝘺, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘔𝘢𝘳𝘬𝘦𝘵-𝘸𝘦𝘪𝘨𝘩𝘵).

Cheers,