Weekly Market Review (21 May 2018) - What happened & What's next?
- JCI dropped 2.9%WoW last week to 5,783.31, losing the previous week gain as Rupiah depreciation continued despite rate hike from Bank Indonesia. Bank Indonesia increased its reference rate by 25bps to maintain macroeconomic stability amid rising external uncertainty. In addition, currency pressure also came from weaker than expected April trade data. As a result, foreign selling continued with USD242mn of outflow during the week. Mining was the most performing sector, gaining 5.1%WoW buoyed by rising commodity prices such as oil and coal. This week, market awaits for US new home sales data as well as the meeting from the last FOMC meeting.
- IDR depreciated 1.4% WoW to Rp14,156/USD last week, slightly underperforming other emerging currencies. Pressure on IDR continued given weak trade data and strength in USD. USD index increased by 1.2% during the week.
- Higher US Treasury yield and pressure on IDR drove up Indo GB yield by 7-13 bps. 10 years yield increased from 7.18% to 7.31%.
- Selling pressure persisted on Indo GB. Foreign investor continued to reduce ownership by Rp6tn mostly on 10 years series.
- The latest US labor data i.e. jobless rate which close to near 17 year low at 3.9% indicated tighter labor market in US. This drives 10 years US treasury yield increase from 2.97% to 3.06%.
- China’s Retail Sales Index grew by 9.4%YoY in April, below consensus expectation of 10%YoY. Meanwhile, its Industrial Production index rose 7%YoY in Apr-18, beat market expectation of 6.4%.
- US retail sales data in Apr-18 came in line with market expectation at 0.3%MoM.
- After high-level meeting between the two countries, US and China are pulling back the possibility of trade wars between them. US will hold off on imposing steep tariffs; while China promised to ‘significantly increase’ its purchases of US products.
- Indonesia’s 4M18 tax revenue is estimated to reach Rp381.5tn, about 20% of the government’s 2018 budget and increased by 11% compared to the same period last year. Higher tax revenue was driven by higher corporate income tax, followed by VAT and import duty.
- Bank Indonesia (BI) raised its policy rate (7 days reverse repo rate) by 25bps to 4.5% from 4.25% which already anticipated by the market given the persistent pressure on Rupiah. This act presents BI’s commitment to maintain the macroeconomic stability amid rising external uncertainty.
- Indonesia’s April trade balance turned to deficit of USD1.6bn, much higher than consensus estimates of a surplus of USD733mn driven by higher of goods import.
Foreign net purchases of Indonesia equities