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09 December 2019

Weekly Market Review (9 Dec 2019) - What happened & What's next?


Market update

  • Equities started the week on a weak footing as President Trump reimposed tariffs on steel and aluminium imports from Argentina and Brazil, and announced intentions to impose 100% tariffs on ~US$2.4bn of French imports. However, it recovered losses later in the week on several positive comments suggesting that the US and China may be very close to a trade deal. Overall, global equities ended the week higher with S&P 500 delivering +0.2% WoW while MSCI Asia ex-Japan outperformed with +0.6% WoW. On domestic side, JCI rallied to 6,186.9 (+2.9%WoW) by the end of the week supported by net foreign inflow of USD55mn. Mining (+5.5% WoW) and Basic Industry (+5.3%) outperformed as some investors have turned risk on mode. Meanwhile, Trade sector was the biggest laggard delivering only +0.9% WoW, as consumer discretionary sector outlook seems to be tough going into 2020. News flows to be watched this week: US decision on trade tariff; China CPI; US CPI, initial jobless claims.
  • IDR strengthened to 14,038 (+0.5%WoW), in-line with the emerging market currencies. On the other hand, DXY weakened to 97.7.
  • Thin volume and uncertainty from US-China trade negotiation were the main theme that drives bond market last week. 10yr series were closed at 7.11% relatively unchanged from previous week closing. While 10yr UST yield increase 5bps to 1.82%.
  • Approaching year end and long holyday, foreign and local investor try to unload their corporate bonds to reduce risk exposure. Corporate bond market were flooded with offer, while bidder still defensive with thin volume actually traded.
  • Foreign slightly decrease position on ID Government bonds IDR 0.32T.

Global news

  • China‚Äôs Nov 2019 Caixin Manufacturing PMI beat expectations edging up to 51.8 vs consensus expectation of 51.5.
  • China Nov 2019 trade balance stood at USD38.7bn vs. consensus expectation USD44.5bn.
  • China forex reserve stood at USD3,096bn vs. consensus expectation of USD3,100bn.
  • US non-farm payroll beat expectation at 254,000 vs consensus 180,000.
  • US ISM Manufacturing PMI remained at 48.1, below consensus expectation 49.2.
  • US initial jobless claim came in at 203,000 vs. consensus expectation of 215,000.

Domestic News

  • Indonesia forex reserve stood at US$126.6bn as of Nov 2019, slightly lower compare to the previous month at US$126.7bn.
  • Government targets final draft for the Omnibus Law of Job Creation would be submitted to the House on Dec 12 so that the discussion may start in the beginning of 2020. This law is planned to revise around 70 rules which are divided into 11 clusters.
  • The projected realization of inflation for 2019 won't reach 3.5