Market update

• Global indexes continued to record losses with S&P 500, DJI, and MSCI ex Japan down by respectively -2.9%WoW, -2.0%WoW, and -4.5%WoW. The selloff driven by sentiment due to ongoing Russia invasion to Ukraine and commodity price volatility. Any news of a ceasefire or a detente is the relief rally to expect considering already cautious investor positioning. On top of geopolitical tension, inflation remains a concern. As Western sanctions on Russia are unlikely to be eased or reversed, we might expect commodity prices will remain volatile for some time along the supply shock. Any supply catches up due to actions from OPEC, Shale producers, and/or Iran/Venezuela could ease the oil price spike. Given another record high inflation, US The Fed will remain hawkish and ready to lift off in the coming week. In China, sentiment has been largely negative over the week, which has dented investor confidence on China stocks. ESG issue get into investors’ radar as Norges, Norway’s oil fund, divested its stake in Li Ning over labour use suspicion. ADR (America’s Depository Receipt of Chinese companies) de-listing sentiment renewed following Securities and Exchange Commission identified some companies failed to adhere Holding Foreign Companies Accountable. On domestic side, JCI recorded a slight loss of -0.1%WoW, as Indonesia posted the first weekly net-outflow in 11 weeks (USD-749mn). The most outperformed sectors were Properties and Real Estate sector and Transportation and Logistic sector, respectively +5.4%WoW and +5.3%WoW. In contrast, Energy sector and Technology sector were the main underperformers, down by -4.7% and -4.1%WoW. News flows to be watched within this week: US PPI inflation, retail sales, FOMC meeting, initial jobless claim; China industrial production; Indonesia trade balance and BI 7-day RRR decision.
• Rupiah strengthened by 0.6% WoW to IDR 14,303, better than average EM currencies' performance. On the other hand, DXY also strengthened by +0.5% WoW to 99.1.
• Total incoming bids in Tuesday’s sukuk auction lowered to IDR15.3tn compared to IDR33.5tn incoming bids on the previous sukuk auction. Demand on the short tenor SPNs 6mo was only IDR6.7tn, much lower from previous bids at IDR21.5tn. The government then issued only IDR6.2tn, which lower than initial target of IDR9tn. But they hold GSO on Wednesday, which was accepted all the incoming bids of IDR11tn. Added with the regular sukuk auction, the government has issued IDR8tn.
• The government also did private placement of conventional bonds totalling IDR 3tn. Series on the private placement were the long tenor bond namely FR82, FR65 and FR62.
• Based on DMO data, foreign ownership as of 11st Mar was reported at IDR870.54tn or 18.26%
• The benchmark 10yr UST yield rose with expectation largely that Fed will raise interest rate next week, while comments from Russia that there had been some talks with Ukraine sending risk on sentiment to market. UST rose also contributed by inflation data for Feb that rose by 7.9%. By the end of last week, 10y UST was reported at 2% (+26bps WoW).

Global news

• US Feb CPI hit new 40-year high, rose by +7.9%YoY (+0.8%MoM), in line with consensus estimation. This was higher than prior figure +7.5%YoY (+0.6%MoM). CPI Core up +0.5%MoM and +6.4%YoY in line with consensus estimation (prior +0.6%MoM and +6%YoY). This print showed that goods inflation spilled to core services, while energy costs passing to core inflation, adding to growing momentum for stickier price pressure.
• US Jan Trade Deficit was USD-89.7bn, deeper than consensus’ estimation of USD-87.3bn and prior USD-82bn. US trade deficit wider as goods and oil imports surge.
• US Initial Jobless Claims added +227k higher than consensus’ estimation of +217k and prior +216k. It was inched up but seems to fluctuate around recent low levels.
• US JOLTS (Job Openings and Labour Turnover Survey) job openings was 11.3mn (prior 11.4mn and consensus’ estimation of 10.95mn), suggesting employers continued to have difficulty to lure workers.
• China Feb PPI up by +8.8%YoY higher than consensus’ estimation +8.6%YoY but lower than prior +9.1YoY. Meanwhile CPI up +0.9%YoY in line with consensus estimation and prior figure

Domestic News

• Indonesia foreign reserve slightly rose to USD141.4bn in Feb22 (USD141.3bn in Jan22), which adequate to finance up to 7.3 months of imports and government’s external debt servicing.
• The Bank Indonesia Consumer Survey recorded at 113.1, lower than 119.6 in the previous month but still at an optimistic level (>100).
• The Indonesia retail sales index decreased by -3.1%MoM (prior +7.6%MoM), but up by +15.2%YoY (prior: +13.8%YoY). This monthly decline is in line with the seasonal pattern of demand normalization after the Christmas and New Year celebrations.
• The Financial Services Authority (OJK) saw a continuous improvement in credit restructuring. The total bank credit restructuring decreased from Rp663.5tr in Dec-21 to Rp599.9tr in Jan-22.
• The government has begun the trial to drop the PCR test requirement for domestic travels for those had received a full dose of vaccine on March 7, 2022. At the same time, foreign travellers are now quarantine-free to enter Bali.

Calender

March 2022

EM Equities Net Foreign Flow