Weekly Market Review (5 Mar 2018) - What happened & What's next?
- Amid USD186m net foreign outflow, JCI was corrected by -0.6% last week (closed at 6,582), moving in the same direction with the global market but with lesser magnitude (S&P500 -2.0% wow, MSCI Europe -3.7% wow, MSCI Asia ex-Japan -2.1% wow). The correction in the global market itself was still driven by hawkish statement from the new Fed chairman, Jerome Powell as well as fear of trade war due to Trump plans to hike steel and aluminum import tariff. By sector, agriculture (+4.2% wow) and basic industry (+2.4%) served as the best performers, while mining came out as the most laggard sector (-3.9% wow). Important newsflow to be watched within this week including US employment data as well as China’s CPI, trade balance and forex reserve from the global side and Indo forex reserve from domestic side.
- Last week IDR weakened by 0.7% against USD, closed at Rp13,757/USD, in line with other emerging market currencies movement. USD (DXY) itself strengthened by 0.1% wow against other major currencies.
- Fed chair positive remarks on US growth and Trump plans to impose substantial tariff on foreign metal has affected Indonesia bond market yield. Bond market yield is still trending up, with 10 year bond yield increased from 6.49% to 6.54%. Foreign investor reduce the ownership of government bond position by Rp8.85tr over the week, while onshore banks accumulating more bond especially for short tenor series.
- Last week, 10yr UST yields slightly declined 2 bps to 2.86%.
- Jerome Powell delivered his first testimony before US Congress. It was interpreted as more on the hawkish side by the market as he indicated that the central bank raising interest rates more than three times was a possibility as inflation moves "up to target."
- Trump decided to raise import tariff of steel and alumina to 25% and 10% respectively. Market take it negatively as it raise possibility of retaliation and trade war.
- US macro data still continue to show strong number on economic activity (Feb ISM Manufacturing came at 60.8 vs expectation at 58.7) and employment (initial jobless claim at 210k vs expectation at 225k), leaving inflation as the key deciding factor for the monetary tightening pace.
- Nikkei PMI Manufacturing came at 51.4 in Feb, better than the previous month at 49.9, indicating continuous recovery on the domestic economy albeit at a gradual phase.
- Feb monthly inflation came at 0.17%, lower than expectation of 0.21%, resulting in Feb yoy inflation at 3.18%, a safe level within BI expectation.
- President Joko Widodo has proposed Perry Warjiyo as the sole BI governor candidate to the parliament.
Foreign net purchases of Indonesia equities