Weekly Market Review (1 October 2018) - What happened & What's next?
- JCI gained 0.3%WoW to 5,976.55 last week despite rate hike conducted by both FOMC and Bank Indonesia by 25bps as those has already anticipated by the market. FOMC did not move up either the median dot trajectory and the market is now pricing in 72% probability of another hike in Dec-18. Foreign inflow accelerated with USD108mn of inflow during the week. Infrastructure was the best performing sector during week (gaining 1.2%WoW) that was driven by PGAS (+10.8%WoW) on strong 3Q distribution volume. Meanwhile, trade was the worst performing sector (-0.31%WoW) due to weak Aug-18 operational number from UNTR. This week, market awaits for US Job Data, and forex reserves data from China and Indonesia.
- IDR depreciated by 0.58% WoW to IDR14,903, underperforming other emerging currencies. On the other hand, DXY continued to rise to 95.1 94.22 (+0.97%WoW).
- Indonesia bond market yield decreased by 6-7 bps across the curved driven by BI plan to issue domestic NDF market regulation. This regulation will increase USD liquidity on Indonesia FX market. 5 years series decreased the most by 7 bps.
- Foreign investor continue to increase position on Indo GB by approximately Rp8.5tn, especially on mid and long tenor series.
- BI will issue a regulation allowing banks in the country to trade non-deliverable forwards in the domestic market to provide an alternative hedging product and help stabilize rupiah. The regulation will require foreign investors or companies with foreign currency liabilities to provide underlying documents for their transactions.
- US FOMC increased its Fed Funds rate target range by 25 bps to 2.0 – 2.25% as already expected by the market. They did not move up the median dot trajectory and did not raise the median long-term GDP growth forecast, so the market perceived less hawkishness from the Fed after the meeting.
- US new home sales for the month of Aug-18 reached 629k, better than the previous month (627k) and relatively in line with consensus (630k).
- China Industrial Profits in Aug-18 grew by 9.2%YoY, slowing from 16.2%YoY in the previous month. Meanwhile, China Caixin Mfg PMI also slowed to 50 from 50.6 in the previous month and came in below market expectation at 50.5.
- Brent oil price rose 5%WoW last week ahead of US economic sanctions against Iran and news of US denied reports that it plans to use emergency oil reserves as additional supply to replace Iran’s supply.
- Bank Indonesia raises its reference rate by a further 25bps to 5.75% which was already in line with the market expectation. The Central Bank has now raised rates 150bps year-to-date; the move follows a 25bps hike in the Fed Funds Rate this week.
- Indonesia Sept-18 inflation came in below consensus estimate at 2.88%YoY and -0.18%MoM vs 3.09%YoY and -0.03%MoM.
Foreign net purchases of Indonesia equities