Weekly Market Review (27 August 2018) - What happened & What's next?
following Indonesia ETF performance and Thursday we saw a decent USD40mn inflow after US listed Indonesia ETF booked gains 5 days in a row. Foreigners (net) bought IDR2.78tn (USD190mn) of Government bonds and USD16mn of equities. Basic Industry and Chemicals (+6.5% WoW) led the gains with Cement, Poultry, and Pulp/Paper industries contributing the major portion. Meanwhile, Infra Utility and Transportation saw the worst performance (-0.3% WoW) driven by Telco. Newsflows to be watched this week: US GDP 2Q18, US PCE, ID Money Supply, CN Manufacturing PMI.
• Rupiah weakened by -0.25% WoW to Rp 14,655. On the other hand, DXY was on the downward trend closing at 95.1 (-1% WoW) by the end of the week.
• Additional supply from 28th august auction and IDR weakening to 14.600 per USD is causing bond yield to increase by 2-10 bps last week. 10 years series increased from 7.8% to 7.9%.
• Foreign investor adding their investment on Indo GB, by approximately Rp2.8 Tn, especially on short tenor series.
• 10 year US Treasury yield held steady at 2.82% after Federal Reserve Chair Jerome Powell said that "further, gradual" rates hikes are appropriate as the economy continues to show signs of strength.
- Fed Chairman Jerome Powell signaled that it plans on sticking to a gradual course of interest rate increase.
- US and China failed to have meaningful progress on their trade talk. Early last week, each proceed with their USD16bn tariff imposition.
- US sales of new homes declined 1.7% to a seasonally adjusted annual rate of 627,000. This is the second straight month decline after a stark drop in June.
- Government to raise income tax to control import. Currently at 2.5%-7.5%, the additional income tax rate would be imposed to 900 commodities by considering, among others, the availability of domestic substitution. While the full list is yet to be disclosed, Indonesia Exporters Association (GPEI) expects foodstuffs, oil & gas, and electronics to be affected. Minister of Finance Sri Mulyani said that the policy’s review will continue in a few weeks before implementation starts.
- July car sales reached 107,431 units, the highest level YTD. Jan-Jul 2018 car sales reached 661,093 (+6.82% YoY), which is supportive on reaching full year estimate of 1.1mn units.
- Indonesia’s palm oil exports rise 30% y/y through 7M18. The total export volume reached 3.55mt, up on 7M17 of 2.73mt. Growth was driven by increased imports by India. The expected level of stocks through year end is 5mt, assuming 10% y/y production increase from Indonesian estates.
Foreign net purchases of Indonesia equities