Weekly Market Review (05 Feb 2018) - What happened & What's next?
- Dragged down by foreign outflow of USD317m, JCI fell -0.5% WoW (closed at 6,628) last week, broadly in-line with other global equity markets amid growing fears over a bond market rout. It was triggered by early signs of inflation in the US as economic growth accelerates, rising wages and widening US budget deficit. Trading (+1.1% wow) and banking (+1%WoW) sectors were the best performer. Meanwhile, Infrastructure (-3.0% wow) and Consumer (-2.9% wow) were the worst performers. Important newsflow to be watched this week including Indonesia’s GDP and forex reserve, US initial jobless claim, China’s trade balance, CPI and forex reserve.
- IDR was declining by -1.1%WoW to IDR13,452/USD, relatively in line with most of emerging market currencies that were weakening against USD. On the other hand, DXY index was relatively flat last week.
- Higher US Treasury yield and concern about faster US normalization drives up Indonesia 10 years yield from 6.18% to 6.28%. Foreign investor continued to sell by approximately IDR9trn especially on non-benchmark series, while domestic investor still in defensive mode.
- The U.S. labor market data began 2018 on a strong data released, NFP rose to 200.000 in January, exceed the consensus of 180.000. Average hourly earnings rose 2.9 percent from a year earlier, the most since June 2009. This drives 10 year US treasury to 2.84%.
- U.S. Non-farm payroll employment surged up by 200,000 jobs in January after climbing by an upwardly revised 160,000 jobs in December. The unemployment rate held at 4.1%, its lowest level since December 2000, for the fourth straight month. The average hourly wage rose 2.9 percent from a year before, the biggest growth since 2009. Thus, it shows the US employment situation is solid.
- U.S. GDP rose at a 2.6% annual rate in the fourth quarter. Output grew 2.5% in 2017 as a whole, the most in three years, and the Federal Reserve predicts 2.5% growth again in 2018.
- U.S. ISM manufacturing index for January was 59.1 (above market expectation of 58.6), lower from the December level of 59.3. The index is still quite elevated—at the top of its post-crisis range.
- January tax revenue grew double digit due to the increase in commodities prices especially crude oil.
- January CPI rose 3.25% YoY and 0.62% MoM, softer than expectation of +3.3% YoY and 0.7% MoM. Inflation eases on the back of lower train and air transport costs, eggs prices despite rising prices on rice, chicken, cigarette.
- Government import relaxations effective 1 Feb18 will reduce monitoring from 48.3% of the total 10,826 harmonized system codes to 20.8%. This is intended to boost industrial competitiveness by making raw material imports easier and by decreasing dwelling days to 0.9-1.1 from 3.9.
Foreign net purchases of Indonesia equities