Weekly Market Review (29 Jan 2018) - What happened & What's next?
- JCI closed at all-time high at 6,660.6 last week (+2.6% wow) with positive movement on all sectors, in line with US and Asia ex Japan market. Several factors that affected those markets were the favorable US economic data and earnings. Sector-wise, mining performed the best (+7.7% wow) as nickel price and coal price soared by +7.3% wow and +3.0% wow respectively. In the other hand, infra and consumer sector served as the laggard with only +1.0% wow gain. Foreign net inflow reached four consecutive weeks with USD52mn inflow last week. Several important newsflow to be watched within this week including US employment data, FOMC rate decision, PMI from various countries (US, China, and Indonesia) and Indo CPI.
- IDR strengthened against USD by 0.1% wow to IDR 13,306/USD, in line with most of emerging market currencies, mainly because of weakening USD (DXY -1.7% wow) due to Steve Mnuchin (US Secretary of Treasury) statement that weaker USD is good for US.
- Increasing global yield and oil price had spooked Indo bond investor last week and pushed up Indo bond yield by 10 – 12bps across the curve. Domestic investor were seen taking the dip in bond market as opportunity to buy, but foreign investor didn’t share the same view as foreign reported net sell by IDR 1.7 tn last week.
- While US preliminary (US reports its GDP three times, preliminary means the first version) annualized 4Q GDP number came at 2.6% below 3.0% expectation, investor still view it positively as it shows strong consumer spending number (personal consumption grew by 3.8% vs expectation at 3.7%). The strong consumer spending was the driver of strong import that drive the headline GDP number to come below the expectation.
- In addition, January preliminary Markit US Manufacturing PMI (Purchasing Manager Index) also shows a strong number at 55.5 (higher than expectation at 55.0). 20 Jan initial jobless claim also came at favorable level at 233k (slightly better than expectation at 235k).
- ECB maintains its key rates (main refinancing rate at 0%, marginal lending facility at 0.25%, and deposit facility rate at -0.4%). While Draghi warned that surge in Euro was a source of uncertainty, investors still expect ECB to start to tighten sooner due to solid EU economic recovery.
- On flow, active emerging market funds received an all-time high (since at least 1992) weekly net inflow of US$4.0bn last week. Among active funds, those with a pan-emerging market (USD2.8bn) and dedicated Asian (USD1.0bn) mandates were the main beneficiaries. In addition, strong inflows into emerging market ETFs (USD4.3bn) propelled the total net inflows to US$8.3bn last week, the second highest weekly inflows into EM equity funds on record (only behind the Mid-July 2015 US$13bn surge into Chinese ETFs).
- The government is to import 346k tons of rice to contain rising prices. Entry before end-Feb18 should limit oversupply near harvest time and mitigate price falls.
- Pertamina lifted the unregulated fuel price, Pertalite, by +Rp100/liter (+1.3% for Jakarta area). While it is keeping regulated premium and diesel prices intact until Mar18, the government is reportedly open to adjustment in 2Q18.
Foreign net purchases of Indonesia equities