Weekly Market Review (19 November 2018) - What happened & What's next?
- On the global sides, major indexes ended the week with loss, Dow Jones and S&P were down by 2.2% YoY and 1.6% YoY respectively. US markets plunged as investors were concerned about slowing growth in tech companies as many companies are experiencing declining visibility. On top of that, Brexit issue also added volatility to the market movement. The pitfalls of Brexit came back into sharp focus last week after UK Prime Minister Theresa May suffered the resignation of key government ministers opposing her bid to reach a divorce deal with the EU. Rejection of the deal by the parliaments would increase the odds of a no-deal Brexit significantly which could be negative for markets. On domestic side, Oct-18 trade deficit came at USD 1.8 billion, much larger than consensus’ estimate of -USD 342 million. Regardless, JCI index was up by +2.4% WoW and foreigners continue to be net buyers with USD232m net inflow. Basic industry and chemical was the most outperformed sectors, gained +5.7% WoW. While agriculture is the only sector with negative movement of -3.1% WoW. Newsflows to be watched within this week include US existing home sales, US initial jobless claim and US manufacturing PMI.
- IDR continued to increase by 0.4% WoW to IDR14,612, along with an increase in some of Asia basket currency. It was mainly driven by positive foreign flow, lower oil price and BI’s decision to hike rate. On the other hand, DXY decreased to 96.5 (-0.5% WoW).
- After BI increased BI 7 days reverse repo rate by 25 bps to 6%, bond market yield decreased by 2-10 bps across the curve with 10 years series decreased the most.
- Foreign investor continue to increase position on Indo GB by IDR1 trillion mostly on short and mid new benchmark series (FR 77 and FR 78).
- 10 year US Treasury yield decreased from 3.19% to 3.08% over the week after a statement from Fed Vice Chairman Richard Clarida. He said the central bank is getting closer to reaching its neutral overnight rate. He also said the central bank needs to be data dependent when hiking rates in the future.
- US initial jobless claims edged up by 2,000 to 216,000 last week but remained near historic lows.
- US CPI increased by 0.3% in Oct-18 from 0.1% in the previous month. Over the past 12 months, CPI rose by 2.5% picking up from 2.3% in Sep-18. However, excluding volatile food and energy components, core CPI increased by 2.1% in Oct-18 (vs 2.2% in Sep-18). Higher gas prices accounted for more than one-third of the increase in consumer prices in Oct-18.
- US retail sales surged by 0.8% MoM in Oct-18 (higher than expectation of 0.6% MoM). Increase in spending is especially seen on gas and new autos.
- US industrial production only rose by 0.1% in Oct-18 mainly due to the decline in mining and utilities output.
- China’s official retail sales show an 8.6% YoY increase in Oct-18, down from 9.2% YoY in Sep-18. Retail sales growth dipped to the slowest pace in the last 5 months.
- China’s industrial production was up 5.9% YoY in Oct-18, up by 0.1% from the previous month and better than economists’ expectation. This is mainly driven by an increase in the production and supply of electricity, thermal power, gas and water as well as manufacturing output.
- Oct-18 trade deficit came out at USD 1.8 billion, larger than consensus’ estimate of -USD 342 million. Import accelerated by 23.7% YoY due to an increase in O&G imports, mainly caused by price factor. While export grew by 3.6% YoY supported by volume which continued to pick up to 10.5% YoY in Oct-18 (from 4.3% in Sep-18 and 2.1% in Aug-18).
- Central Bank decided to increase 7 days reverse Repo rate by 25 bps to 6.0%.
- Government launched the 16th economic package to handle deficit. The package comprises of 3 main points: 1) An expansion of the tax holiday program, 2) Adjustment of the negative investment list and 3) The provision of tax incentives for the newly mandated conversion of export earnings to rupiah.
- Central Bank projects GDP growth to grow by 5.1-5.2% next year.
Foreign net purchases of Indonesia equities