Weekly Market Review (11 December 2017) - What happened & What's next?
- JCI went up by 1.3% in the last week, closed at 6,031 amid a continuing net outflow of IDR2.4trn. Regional market saw a mixed closing with South East Asia markets (PCOMP +2.0%, SET +0.4%, AND KLCI+0.2%), US (S&P +0.4%), and Europe (MSCI Euro +1.5% wow) posted a positive result, while North Asia saw a lower closing levels (Shanghai -0.8%, Kospi -0.5%, and Hang Seng -1.5%). In daily basis, most of the markets saw a similar movement of correction on the early of the week followed by recovery on the end of the week. Several factors that affected market movements are US tax reform progress, Robert Muller’s Trump investigation, US spending bill negotiation (along with its consequence of potential government shutdown), and Brexit negotiation. Within short term horizon, these same factors are among that we still need to watch, in addition to regular US economic data (CPI, jobless claims) and further guidance from The Fed and BI in this week. It is already within market expectation for The Fed to hike by 25bps in this incoming meeting.
- IDR slightly depreciated by 0.2% wow to IDR13,550/USD, in line with weakening emerging market peers. USD index (USD against major currencies) itself also strengthened by 1.1% following progress on US tax reform.
- USD strengthening and strong US NFP have a little impact to IDR bond market. Bond market volume was decreased with bond yield slightly increased by 1bps. 10 years yield increased from 6.51% to 6.52%, 5 years and 20 years yield stabilized at 6.02% and 7.24% respectively.
- Government successfully pre funding 2018 budget by issuing USD 4 billion global bond. the first SEC registered global bond with the lowest coupon ever issued by Indonesia Government. Total incoming bid was USD 10.66 billion, mostly from offshore. Previously, Jasa Marga has also succeeded in issuing the first rupiah global bond (komodo bond) totaling IDR4tn, mostly bought by offshore investors.
- UK and EU reached a deal on several point for Brexit near the end of the week: EU citizens in UK and vice versa have the right to stay, clarity on Irish border, and UK will continue to pay into EU budget as normal in 2019 and 2020. The exit will happen in March 2019, two years after article 50 was triggered.
- Trump signed a two-week spending bill that keep the federal government running through Dec 22 while the leaders are negotiating a longer term agreement. It temporarily prevented federal government shutdown.
- After US Senate passed its version of Tax Reform bill in two weeks ago, they are currently forming a conference committee with House of Representative to harmonize the differences between their version with the House of Representatives’ version. More clarity on Tax Reform may strengthen USD.
- US posted a series of positive economic data: 2 December initial jobless claim (at 236k, below expectation at 240k), November changes in nonfarm payroll (228k vs expectation at 195k), and November unemployment rate 4.1% as expected). Those data point are in line with our view of global economic recovery. In the other hand, China posted its November CPI number at 1.7% (vs expectation at 1.8%).
- Indo November foreign reserve came at USD126.0bn (vs previous number at USD126.6bn)
- The government considers a 4.7% premium price hike to IDR6,750/liter following oil movement. It is expected to have minimal impact into inflation
- BI indicated that it will maintain a neutral policy stance if inflation and currency are within its expectations. It targets 2018 inflation of 2.5-3.5%. BI also just launched National Payment Gateway connecting the domestic payment system.
Foreign net purchases of Indonesia equities