Weekly Market Review (20 August 2018) - What happened & What's next?
- Global markets were shaken after US doubled its tariff on Turkey’s Aluminum and steel following escalated tension between those two countries regarding a detention on US Pastor by Turkish Gvt. Given that situation and current weak economy condition in Turkey (twin deficit and high inflation), Turkish Lira collapsed -37% YTD. On domestic side, foreign outflow continued this week by -IDR2.5trn. As a results, JCI fell -4.8%WoW to IDR5,784 last week, weaker than regional market. Agriculture sector was the best performer (+3.1% WoW), buoyed by Indonesia Government’s plan to implement B20 (from B7) for Biodiesel. Meanwhile, Mining sector became the worst performer by declining -6.1%WoW, dragged down by MSCI rebalancing event. Newsflows to be watched within this week include US Initial Jobless Claim, FOMC Meeting Minutes, Markit Manufacturing PMI and New Home Sales.
- IDR weakened by -0.8% WoW to IDR14,593, relatively worse than regional market. Furthermore, DXY was at 96.2, relatively flat WoW, despite hitting highest point YTD on Tuesday at 96.7.
- BI rate hike made bond market yield increased by 25-39 bps last week. 20 years series increased the most by 39 bps, from 8.06% to 8.41%
- Foreign investor reduce position on Indo GB, by approximately Rp 2.7 Tn, especially on long tenor
- Following positive trade development between US and China made 10 years US Treasury yield stabilize at 2.87%-2.88%.
- US Initial Jobless Claims slipped 2,000 to a seasonally adjusted 212,000 for the week ended Aug 11, above market expectation of 215,000.
- China retail sales rose +8.8%YoY in July (vs 9.0% in June), below expectation of 9.1%.
- China's industrial production grew steady at 6%YoY in July, below expectation of 6.3%.
- Jul’18 trade balance turned deficit of –USD2.0bn (vs. consensus estimate at USD680mn), after a surplus of USD1.7bn in Jun’18. Exports were supported largely by price as aggregate price of export grew 0.1% in Jul18 (Jun18: -10.3%), while import was driven more by volume (growing by 15.2% YoY from -7.1% in Jun18).
- Bank Indonesia raised its 7-day Reverse Repo Rate (7DRRR) 25bps to 5.50% after the 100bp increase in May-Jun’18, in-line with expectation.
- The government 2019 draft budget (RAPBN 2019) is proposed with tax revenue growth of +15%YoY, expenditure growth by +10%YoY thus shrinking the budget deficit to 1.84% of GDP from 2.12% FY18F. GDP growth targeted at 5.3% and inflation at 3.5%. Social protection budget increased the most by +15% YoY, while Infrastructure budget sees an increase of +2.5%YoY. Moreover, transfer to region and village fund increased by +11.2%YoY.
Foreign net purchases of Indonesia equities