Weekly Market Review (9 Apr 2018) - What happened & What's next?
- We saw JCI plunged -0.2%WoW along with foreign outflow of USD101.8m last week (YTD: USD1.8bn) as US President threatened to escalate a confrontation with China over trade. It was relatively in-line with other regional markets. JCI was dragged down by financial sector (-2.4% WoW). Meanwhile, miscellaneous industry gained +2.3%WoW, due to technical rebound on auto stock. Globally, equity investors worry about the risk of a tit-for-tat trade war between the world’s two biggest economies (US and China). Newsflows to be watched within this week include US CPI, initial jobless claim, FOMC meeting minutes, China’s CPI and trade balance.
- IDR declined by -0.1% WoW to IDR13,778/USD last week, relatively better than emerging market peers that fell -0.3%WoW. Weakening currencies in emerging market was mostly drag by thread from US-China trade war. Meanwhile, USD index (DXY) was relatively flat last week.
- Despite concern about trade tension between US and China increased, Indonesia bond market yield slightly decreased by 2-4 bps across the curve. 10 years yield decreased from 6.63% to 6.59%.
- Foreign investor still accumulated short and mid tenor parts of the curve.
- 10 years US treasury increased from 2.74% to 2.77% last week. US jobs data report released, with non-farm payroll of 103.000 in March, below consensus of 193.000.
- The US trade deficit broadened to USD57.6bn in Feb’18, above consensus expectations of USD 56.8bn. The balance for goods widened only slightly to -USD77.0bn from -USD76.7bn while the services balance fell to USD19.4bn from USD20.0bn in January. The goods trade balance with China narrowed slightly in February (to -USD34.7bn from -USD35.5bn).
- The US ISM manufacturing index fell to 59.3 in March’18, lower than consensus at 59.7. All sub-indices pulled back slightly in March, with the biggest decline coming from the new orders (from 64.2 to 61.9) and employment (from 59.7 to 57.3) indices.
- U.S. job growth eased in March’18 with unemployment rate was steady at 4.1%, while average hourly pay grew just 2.7%YoY. The US added a modest 103,000 jobs, but below expectations of 185,000.
- U.S. filings for unemployment benefits rose more than expected last week to the highest in almost three months amid holidays that may have played a role in the increase. Initial claims for state unemployment benefits rose 24,000 to a seasonally adjusted 242,000 for the week ended March 31.
- The China Caixin manufacturing PMI for March’18 came in at 51.0, hitting a four-month low, below economists’ expectation at 51.7. The slowdown in manufacturing expansion was due to weak growth in production and total new orders amid muted foreign demand.
- China’s forex reserves rose USD8.34bn to USD3.14trn in March’18 from the previous month, slightly below the USD3.156trn economists’ estimates.
- March inflation picked up to 0.20% YoY (vs consensus estimate at 0.12%), up slightly from 0.17% in February. As such, the inflation YTD came in at 0.99% while YoY inflation rose to 3.4%. Main drivers of the inflation are spices and non-subsidized. Core inflation did pick up, yet it is too early to conclude about demand. Core inflation rose to 2.67%YoY, the first pick up since Oct’17.
- Foreign reserves declined to USD126bn in March’18 from USD128bn in February, mainly due to monetary operations and the settlement of government global bonds. The position of foreign reserves is equal to 7.7 months of imports and global bonds settlement.
- Indonesia PMI fell to 50.7 in Mar’18 vs 51.4 in Feb’18. This lower confidence level from manufacturing is attributable to global trade war sentiment. The trend of decreasing PMI happens across countries.
Foreign net purchases of Indonesia equities