Weekly Market Review (21 January 2019) - What happened & What's next?
- Global markets ended the week higher on the back of more optimistic tone towards US-China trade deal, signals from Federal Reserve that it will be flexible with monetary policy and upbeat earnings on some of US stocks. Dow Jones Index posted +3.0% WoW while S&P500 reported +2.9% WoW. On domestic side, foreigners also continue to be net buyers with USD65mn net inflow, 15th consecutive day in a row. JCI closed the week on the positive side to 6,448 (+1.4%WoW) by the end of the week. Infra sector became the most outperformed sector by gaining +3.1%WoW likely driven by passive inflow to TLKM (12% of MSCI Indonesia). Meanwhile, Agriculture sector was the biggest laggard with -0.9%WoW. Newsflows to be watched within this week include China GDP, industrial production; US PMI, initial jobless claim, and home sales.
- IDR weakened by 0.9% WoW to IDR14,178, in-line with other currencies as DXY strengthened to 96.3 (+0.7%WoW).
- Stronger Dollar index and increasing EM bond market yield made Indonesia bond yield also increased by 8-20 bps. 20 years series increased the most.
- Foreign investor increase position on Indo GB by Rp 2.2tn, mostly on 5 years series and long tenor non benchmark series.
- After Chinese officials offered to boost US imports for six years, 10 years US Treasury yield increased from 2.71% to 2.79%.
- China trade balance recorded at $57bn, higher than the consensus estimate of $52bn. China’s 2018 trade surplus with US posted $323bn, the highest on record since 2006.
- US Treasury Secretary, Steven Mnuchin, is debating ratcheting back tariffs on Chinese imports as a way to calm markets and give Beijing an incentive to make deeper concessions in a trade battle that has rattled global economies.
- US initial jobless claim recorded lower at 213,000 vs. consensus of 220,000.
- BI maintained 7-day reverse repo rate at 6.0%, in-line with the consensus view. Additionally, BI governor has also hinted that current policy rate has almost reached its peak but monetary stance remains hawkish.
- ID trade balance recorded at $1.1bn deficit in December 2018, lower than November 2018 deficit of $2.1bn.
- Existing sales/income tax regulations to be enforced for online trades. These include 10% of VAT, income tax, luxury tax, as well as excise tax for import goods >USD1,500 in customs value. For income tax, similar to conventional small businesses, online sellers with annual sales
- Adjustment in premium for BPJS will likely happen after the 2019 election. Vice president Yusuf Kala stated that in order to resolve the deficit problem, they will have to increase the premium likely after the 2019 election. The current premium of Rp23,000 per month will not be enough to cover the deficit by BPJS.
Foreign net purchases of Indonesia equities