Weekly Market Review (19 Mar 2018) - What happened & What's next?
- We saw JCI plummeted as much as -2%WoW along with foreign outflow of IDR2.85trn last week, relatively underperform global markets. It dragged down by Infra sector (-6.1% WoW), due to expected poor 1Q18’s results from Telco company. Meanwhile, financial was the most defensive with only -0.6%WoW. Globally, equity investors worry about a potential global trade war, particularly between the U.S. and China, as the Trump administration’s pushes for protective levies. Newsflows to be watched within this week include BI benchmark rate decision, US current account, initial jobless claim, new home sales and FOMC rate decision.
- IDR plunged by -0.3% WoW to IDR13,751/USD last week, relatively in-line with emerging market peers. Weakening currencies in emerging market was mostly triggered by thread from potential import tariff imposed by US. Meanwhile, USD index (DXY) was up by +0.2%WoW, on the back of stronger US industrial data production and initial jobless claims.
- Ahead of Fed meeting this week, foreign investor recorded inflow to bond market by IDR4.77trn versus outflow in previous week. Yield down 3-11 bps across the curve.
- 7.4% yield on 20 years tenor series seems to be attractive entry points to foreign investor, that’s start to collect in small size. This made 20 years yield decreased to 7.29% while 10 years yield also decreased from 6.73% to 6.7%.
- 10 years US Treasury yield fall to 2.84%, while 2 years US Treasury yield hit 2.29%, the highest level since September 2008. This made spread between 2 and 10 years narrowed to 55 bps. The Federal Reserve expected to hike rates at its upcoming meeting and investors are eyeing mostly on Fed’s dot-plot.
- US CPI increased 0.2%MoM in February after rising a seasonally adjusted 0.5% in January. Core inflation slowed to a rate of 0.182%MoM in February from January’s 0.349%MoM. It was due to a decline in gasoline and fuel-oil costs kept a lid on price pressures in February, along with a muted rise in the cost of rent and a drop in car prices. Having said that, it may help calm a market that remains on concern the Fed would raise interest rates more aggressively.
- US initial jobless claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 226,000 for the week ended March 10, relatively in line with economists' expectations.
- U.S. industrial production jumped 1.1%MoM in February, the largest increase in four months, due to a weather-related rebound in construction and a rise in output from the nation's oil and gas fields and mines.
- China’s industrial production expanded by 7.2%YoY in 2M18, well above the 6.2% pace in December and forecasts for a 6.1% rise by economists. It was mainly boosted by robust overseas demand and higher investment from property developers and private investors.
- China's retail sales of consumer goods grew 9.7%YoY in 2M18, slightly slower than the 10.2%YoY rise seen in 2017.
- Indonesian gov’t recorded total foreign debt of USD358bn in Jan18, +11% YoY. 51% of them is comprised of sovereign debts, while the remaining are private sector debts. Indonesian gov’t is confident that current level is healthy and under control.
- Indonesia trade balance deficit reached USD116m in Feb’18 alone or USD872m in 2M18. Import continued its momentum, accelerating by 25.2% YoY (vs. 27.9% in Jan18) whereas export accelerated to 11.8% YoY (vs. 7.9% in Jan18). The trade deficit is three months in a row from Dec 2017-Feb 2018 whereas in 2017, the deficit is only in Jul and Dec 2017. Having said that, the room for policy cut is unlikely for this year amid faster monetary normalization on advanced countries.
Total foreigners' net purchases (USDm)