Market update

• US equity indexes posted modest gain last week (S&P +1.9% and DJI +0.8% WoW), reversing the negative trend in the previous week. Large communication services, consumer discretionary, and information technology sectors performed best within the index. Energy shares fell sharply on Tuesday as domestic oil prices fell back below USD 100 per barrel for the first time in nearly two months, but they rallied alongside crude prices later in the week. Some economic data show decelerations in economy but remain strong as numbers are still above expectations. ISM services Global indexes were in the red zone as recession fear led risk assets (stocks, commodities) in June came modestly above consensus estimates. Meanwhile, non-farm payroll report showed additional jobs of 372k in June, well above expectation of 270k. On domestic side, JCI was closed lower -0.8% WoW. The worst performer sectors were consumer and consumer discretionary, each down by -0.9% and -0.8% WoW respectively. While energy sector was the best performing sector, up by +2.4% WoW. News flows to be watched within this week: ID trade balance, US CPI, US PPI, US initial jobless claims, US retail sales, US industrial production, CN CPI, CN PPI, CN trade balance, CN retail sales and CN GDP.
• Rupiah continued its weakening trend, down -0,3% WoW to IDR 14,977, performed better than most EM currencies. In contrast, DXY strengthened by 1.8% WoW to 107.
• INDOGB traded sideways, with yields closing the week 1-3bps lower despite higher USD/IDR. Market starting the week more defensive as USD/IDR broke the psychological level of Rp 15,000. By the end of the week, 10yr INDOGB was reported at 7.25% (-1bps WoW).
• Total incoming bids on Tuesday’s bond auction continued to decline, reaching IDR 26tn compared to IDR 35tn in the previous auction. Solid demand still came for the 10yr amounting to IDR 13.6tn. Compared to the previous auction, almost all series’ bids decreased except for the longer tenor 20 and 30yr whose incoming bids reached IDR 1.7tn and IDR 0.3tn (vs. IDR 1.6tn and IDR 0.2tn respectively). In line with the decreasing demand, government lowered its issuance to IDR 13.8tn compared to IDR 18.9tn in the previous auction.
• Government also issued four VR bond series through private placement with BI, with total value of IDR 21.8tn. The government is spreading the maturity profile equally throughout 2027-2030. This was the first SKB III between BI and MOF to finance budget deficit this year. In addition, the government also announced that bond issuance target for Q3 auction lowered to IDR 147tn.
• Based on DMO data, foreign ownership as of 6th July was reported at IDR 771.12tn or 15.88%.
• US Treasury yields rose with closely watched 2yr and 10yr yield curve remained inverted. Treasury yields pushed higher after the release of the latest Fed minutes that showed the central bank was leaning toward another 75bps rate hike as it focuses on bringing down inflation. By the end of the week, 10yr UST was reported at 3.09% (+21 bps WoW) while 2yr UST was at 3.12% (+28bps WoW).

Global news

• US ISM services index in June was at 55.3%, higher than expectation of 54% but lower than prior figure of 55.9%.
• US job openings in May was recorded at 11.3mn, slightly higher than expectation of 11.1mn but lower than previous month's at 11.7mn.
• US initial jobless claims rose by 235k, higher than estimate of 230k and previous week's number of 231k.
• US non-farm payrolls in June added 372k jobs, much higher than consensus expectation of 250k but slightly lower than number in previous month of 384k.

Domestic News

• Non-subsidized gas price in Indonesia was increased in Indonesia as of 10 July 2022. Pertamax Turbo up 12% to Rp16.2k, Pertamina Dex up 20% to Rp16.5k, and Dexlite up 16% to 15k.
• Foreign reserve slightly increases to USD 136.4bn in June from USD 135.6bn in May despite the net foreign outflow and weakening exchange rate. The reserve is equivalent to 6.6 months of imports.
• Indonesia Covid cases have risen quite rapidly for the past few weeks with ~2.5k new cases per day. Last Tuesday, the govt escalated the PPKM / mobility restrictions level 2 which limits public facilities’ capacity to 75% in Java-Bali. However, the Minister Home Affairs returned the status to level 1 just a day later, claiming that there were indications that Covid-19 cases have passed the peak.

Calendar

July

EM Equities Net Foreign Flow