Weekly Market Review (4 Sept) - What happened & What's next?
- JCI declined 0.9%WoW to 5,864.1 as the market lacked of catalyst and foreign remains a net seller with USD110.6mn; this was contrary to the regional market which closed at a positive territory (Dow Jones rose 0.8%WoW) which was supported by good global PMI data. Agri sector was the most underperformed in JCI last week without any specific news (CPO price was flat). This week, markets awaits for ECB policy rate decision, China and Indonesia forex reserves data. Geopolitical risk remains a concern as North Korea conducted its sixth nuclear test.
- IDR slightly (0.2%) appreciated for the week closing at Rp13,318/USD, neutral to other emerging currencies.
- Indonesia bond markets rally continued driven by local and foreign investor persistent buying flow as US treasury yield stabilized at 2.17% and jobs data released in US. Yield decreased by 15-20 bps across the curve. The most demanded series are long tenor series (15-20 years area). 20 years yield decreased the most by 20 bps while 5 years decreased by 15 bps and 10 year yield decreased by 15 bps.
- US jobs data slowed in August, with 156k jobs added, below market expectations of 180k. The jobs data eased the prospect of another rate hike before December 2017. 10 year US Treasury yield stabilized at 2.17% while dollar Index also stabilized at 92.6.
- North Korea is reportedly test another nuclear bomb, causing a 6.3 magnitude earthquake. This might escalate another geopolitical risk in the region.
- China industrial profit grew by 16.5%yoy in July, following a 19.1% increase in June. A slowdown is expected as government tried to cool down the economy by reducing debt level and curb property speculation.
- US economy added 156k jobs in Aug-17 and unemployment rate moved up slightly to 4.4%. This was slightly below market expectation of 180k new jobs and 4.3% unemployment rate; however, market reacted little to the news.
- China Caixin manufacturing PMI for the month of Aug-17 stood at 51.6, higher than consensus expectation of 51 and provided good sentiment to global growth.
- Government plan not to increase fuel price in September. We think this is in line with most of economist expectation.
- Government lowered micro SME tax to 0.25% from previously 1%. This regulation is intended to increase tax compliance as only 2m out of 59 micro SME business in Indonesia.
- Bank Indonesia expect inflation to hit 3.5% in 2018. This is in line with government assumption in RAPBN 2018. We think that it could be translated that there will be no administrative price increase next year.
Foreign net purchases of Indonesia equities