Market update

• Global indexes in negative territory across the board on Fed's Powell's solvency warning and risks of Trump slapping China with additional tariffs. Powell warned that US recovery could take until end of 2021 or until vaccine is discovered. Further, Powell added that weak economy recovery could turn liquidity crisis into solvency crisis. US-China tension rise also caused by Trump administration move to cut Huawei off from global chip suppliers. On the domestic side, JCI dropped for a fourth-straight day to IDR4,507.6 (-2.0% WoW), as foreign selling pressure persisted. Financial sector was the worst performed, plunged by -7.5% WoW due to concern loomed over investors’ head regarding who will bear the credit risk (anchor bank or government) on the new liquidity support regulation of bank anchor to executor bank. On the contrary, Consumer sector has the largest gain of +5.1% WoW. News flows within this week: Indonesia 7Days RRR decision, US FOMC minutes, initial jobless claims, Markit PMI
• Rupiah strengthened by 0.4%WoW to IDR14,860. On the contrary, DXY index depreciated by 0.7%WoW to 100.4
• Bond foreign ownership posted a slight increase of IDR0.9trn for the week. Indonesia bond market is expected to be less active in the next two weeks towards Hari Raya holiday, as market will be closed from Thursday and will resume on Tuesday 26th of May.
• Rally in Indonesia bond market as yield dropped by 10-40 bps along the curve. The best performers were the mid tenor series as flows were seen in 5Y-10Y. 10 years yield decreased from 8.05% to 7.76. Indonesia trade balance data released on Friday showed a USD344.7m deficit in Apr-20, better than USD 2.29bn deficit in Apr-19 but lower than USD 715.7m surplus in previous month.
• The likelihood of further decline in Indonesia bond yield is expected to be limited due to mixed external catalyst. Increasing concern came from the pickup in number of confirm cases as countries begin lifting lockdown measures and the increasing US-China tension after US government blocked semiconductor shipments to Huawei Technology. However, consumer sentiment index data from University of Michigan rose to 73.7 from previous month of 71.8 ease the pressure. The mixed external sentiments are expected to spurred investor to enter safe haven assets, reducing demand for riskier assets as 10-yr US Treasury yield decline from 0.69% to 0.65% for the week

Global news

• In 2 months, 36.5m Americans have lost their jobs after nearly 2.98m jobless claim were filed last week (higher than consensus of 2.5mn). However, this last week figure is lower than prior week of 3.18m.
• US retail sales plunged a record of 16.4%MoM in April, far worse than 12.3%MoM estimated (prior -8.3%MoM). The collapse in retail spending followed job losses unseen since in WWII. Clothing stores took the deepest hit with a 78% tumble.
• The Fed begins buying USD750bn in corporate bonds, for the first time in the history. The Fed will start with bond ETFs, where most purchases will be in funds that hold investment-grade debt.
• China’s April PPI down by 3.1%YoY (vs prior -1.5%YoY, consensus -2.5%YoY) while CPI up by 3.3%YoY (vs prior 4.3% yoy, consensus 3.7%YoY). Further slowing in inflation signal additional easing by PBOC is needed. Deeper PPI deflation indicates weakness in demand
• China retail sales fell by 7.5% in April (vs consensus -6%), this is better than a -15.8