Weekly Market Review (14 Aug) - What happened & What's next?
- Investors were cautious as geopolitical tension increased on North Korea. Dow Jones and Emerging Market declined by 1.1% and 2.3% WoW respectively. JCI went down 0.2% WoW, but outperformed regional market. Foreign formed US$125m outflow, continued since June 2017. Meanwhile, in terms of sector, interest sensitive sectors such as property and financial gained by 0.6% and 0.5% respectively, as investors bet on BI easing policy in upcoming meeting next week. On contrast, consumer declined the most by 1.6% dragged by cigarettes companies. Important event to be watched this week include Central Bank meeting in Europe, Minutes Meeting by Fed and APBN 2018.
- IDR depreciated by 0.3% to Rp13,361/US$, in line with other Emerging Market currency movement.
- Geopolitical risk and soft inflation data released in US made the bond market rally last week. The rally supported by offshore and domestic investors, with the FR 75 (the new 20 years benchmark) as the most demanded series . 10 years yield decreased by 2 bps from 6.88% to 6.86%, new 20 years benchmark series decreased by 18 bps, from 7.65% to 7.47% while the old series only decreased by 2 bps.
- US 10 years yield finished the week lower, decreased from 2.27% to 2.19% after softer data in the US and ongoing concerns over the geopolitical risk (safe heaven). The US inflation data came lower than expected (0.1% vs 0.2% month on month expectation). DXY decreased from 93.6 to 93.2 last week.
- Geopolitical risk increased as story about North Korea’s nuclear resurface once again, raised risk premium in the market.
- US inflation disappointed (0.1% MoM in July vs consensus expectation of 0.2%) for the fifth straight month. This had cut market expectation on another Fed rate hike to 30% this year.
- Japan 2Q17 GDP growth surged by 4% YoY, higher than economist estimate of 2.5%. Strong number is supported by good data in plant and equipment investment.
- Bank Indonesia to ease after considering good inflation data and soft GDP figure. BI monthly meeting will be held on 22 Aug.
- Indonesia Foreign Reserve increase US$4.7bn to US$127.8bn. This is supported by global government issuance and asset repatriation under tax amnesty program.
- Bank Indonesia estimate that national e-commerce spending has reached Rp75trillion a year or US$5.6bn in 2016. BI expect e-commerce transaction could achieve 10% contribution to GDP by 2025.
Foreign net purchases of Indonesia equities