Weekly Market Review (21 Aug) - What happened & What's next?
- JCI rose strongly last week gaining 2.2%WoW to 5,893.8 that was boosted by the announcement of Indonesia 2018 draft budget that favors cigarettes sector i.e. low excise revenue target. This brought consumer sector to outperformed the market with 6.3%WoW gain for the week. JCI was also outperforming regional market (Dow Jones was -0.8% for the week) that was overshadowed by deterioration in US political sentiment (Charlottesville’s cases). Foreign remains as a net seller in JCI with about USD48mn outflow for the week. This week, market awaits for Bank Indonesia rate policy decision and comments from Fed and ECB at the Jackson Hole symposium.
- IDR was flat for the week closing at Rp13,362/USD, slightly underperforming other Emerging Market currency.
- Bond market yield relatively stable ahead BI meeting. Foreign investor recorded outflow Rp1.28tn last week. 5 years yield was stable at 6.57%, 10 years yield decreased by 2bps to 6.86% and 20 years yield decreased from 7.58% to 7.5%.
- Domestic data showed trade deficit of USD271mn in July, with export accelerating by 41%YoY and imports increased 54%YoY. Import increased driven by capital and consumer goods import.
- Geopolitical risk slightly subsided after North Korea decided not to launch a threatened attack on Guam.
- US FOMC minutes skewed to the ‘dovish’ side especially on the inflation side as uncertainty on its near-term outlook had increased. However, on balance sheet normalization was rather ‘hawkish’ as the minutes described the timing of balance-sheet normalization to happen ‘at an upcoming meeting’. Meanwhile, outlook on economic growth and labor market were little changed.
- US retail sales was good for Jul-17 at 0.6%MoM, higher than market expectation of 0.3%.
- China’s industrial production growth slowed to 6.4%YoY in Jul-17 vs 7.1% consensus and 7.6% in the previous month.
- Indonesia’s 2018 draft budget indicated a more conservative targets at 8%YoY revenue growth and 5% growth in expenditure, implying a lower budget deficit at 2.2% of GDP.
- Some points from the 2018 draft budget: on the infrastructure budget, government plans to spend Rp409tn on infrastructure in 2018, up 5.6%YoY, while total excise tax revenue is targeted at 1.5%YoY growth (0.5%YoY growth for tobacco excise revenue) implied a favorable policy for cigarettes sector.
Foreign net purchases of Indonesia equities