Weekly Market Review (8 Jan 2018) - What happened & What's next?
- JCI ended up flattish in the first week of January (closed at 6,354) after a series of profit taking happened in the first half of the week followed by rebound in the last two days of last week. While in the same period, global equity markets performed positively on optimism of continuing global economic recovery. Sector-wise, mining sector (+5% wow) performed the best as coal price rose by 3.6% wow. In the other hand, financial sector (-1.0% wow) and infrastructure (-1.0% wow) came as the worst performers. Important newsflow to be watched this week including China inflation and trade balance, US inflation and initial jobless claim, and Indo forex reserves.
- IDR appreciated by 1.0% wow to IDR13,416/USD, in line with most of emerging market currencies that were strengthened against USD.
- IDR bond market yield decreased by 10-15 bps across the curve, driven by Fed’s meeting minutes that still support gradual approach and low foreign portion awarded at first government bond auction. The rally supported mainly by foreign investor that increased government bond holding by IDR 3.6 Trillion . 10 years yield decreased from 6.25% to 6.15% while 20 years yield decreased from 7.08% to 6.93%.
- US Treasury yield increased from 2.40% to 2.47%, driven by expectation on stronger US economic growth after tax bill passed.
- US Dec ISM Manufacturing Purchasing Manager Index came at a strong number of 59.7, above expectation of 58.2. But in the other hand employment figures such as 30 Dec initial jobless claim (250k vs expectation 240k) and Dec change in nonfarm payroll (148k vs expectation 190k) came weaker than expectation. The Dec unemployment number itself came at 4.1%, in line with expectation.
- China Caixin Manufacturing Purchasing Manager Index came at 51.5, stronger than expectation at 50.7.
- Manufacturing Purchasing Manager Index came at 49.3, slightly lower than previous months at 50.4. Despite the PMI number came slightly below 50, we still believe the domestic economy is currently recovering albeit it’s a soft one.
- In the other hand, Dec monthly inflation came slightly above expectation at 0.71% (vs expectation at 0,45%) due to food price component. The Dec outcome put FY17 inflation at 3.61% (vs expectation 3.35%), while core inflation came at 2.95% yoy, below expectation of 3.07% yoy, hence we still think inflation is under control.
Foreign net purchases of Indonesia equities