Weekly Market Review (26 Mar 2018) - What happened & What's next?
- JCI dropped 1.5%WoW last week, closing at 6,210.7 which was in line with the regional market correction (Dow Jones dropped 5.7% last week) and was triggered by deepening risk of global trade wars after US administration revealed plan to impose tariffs on Chinese imports targeting aerospace, information technology and machinery which later followed by China announcement of plans for tariffs on US pork, steel pipes, fruit, and wine imports. Infrastructure was the worst performing sector during the week, while agri was the most performing sector after news on Indonesia’s winning on anti-dumping appeal against EU on biodiesel. Foreign outflow continued at USD273mn last week. This week, market awaits for US 4Q GDP (third announcement) and the development on global trade frictions.
- IDR relatively stable last week, closing at Rp13,782/USD (0.2% depreciation) and slightly underperforming other emerging market peers. Meanwhile, dollar index declined 0.9% WoW.
- Negative sentiment that come from fear of trade wars affected Indonesia bond market yield. Bond market yield increased by 10-20 bps across the curve last week. On Friday, 10 years yield increased to 6.91% along with CDS that increased to 105.5.
- Foreign ownership continued to increase in Indonesia government bonds. Foreign investor start to accumulate 10 years yield at level 6.8% while BI also support the market by accumulated 10 year bonds at 6.85%.
- 10 years US Treasury yield fall to 2.82% last week after Fed rate hike. This driven by investor fear of trade wars. Last week President Donald Trump signed an executive memorandum that would inflict tariffs on Chinese imports of up to $60 billion.
- As expected, FOMC hiked rates by 25bps during its March meeting and revised higher growth, inflation, and employment projections. The dot projection for the target rate also shifted higher with more hawkish shifts in participants.
- US new home sales for the month of Feb was 618k units vs 620k of consensus estimation.
- Indonesia wins appeal against EU over anti-dumpting tarriff on biodiesel, effective since 16 March 2018. Previously, Indonesia biodiesel products were given 8.8-23.3% tax on imports since 2013.
- Bank Indonesia kept its 7-day reverse repo rate at 4.25% despite FOMC rate hikes as has been anticipated by the market.
Total foreigners' net purchases (USDm)