Market corrected despite positive data

• US equity drop; treasury yield up despite positive PMI data
• Taxation reform to be implemented on global corporations
• JCI corrected; govt’ bond yield up while trade data is positive

US market dropped while PMI data improved
US Markit Services PMI jumped to a fresh record of 70.1, better than the consensus expectation of 64.5, and also increased from the prior 64.7 recorded in Apr’21. US Markit Manufacturing PMI also topped consensus expectation, reaching 61.5 in May’21, higher than the 60.2 figure expected by the consensus, while also beating the previous number of 60.5 recorded in Apr’21. However, following this data release the S&P500 dropped 0.1% on Friday, resulting in a 0.4% correction for the week. US 10Y bond yield recorded an increase of 2.7bps last week while US Dollar Index increased slightly by 0.5%. We believe the sentiments in the US equity and bond market would be positive this week, supported by positive data of Markit.

Western countries to implement taxation reform on global FinTech
Britain’s main opposition Labour Party said it will push for a vote in parliament on Monday over support for the US plans to introduce a global minimum corporation tax rate. The US Treasury Department earlier this week said it would accept a floor of at least 15% during international negotiations. The Biden administration’s proposed Global Intangible Low-Taxed Income tax (GILTI) rate of 21%, aimed at capturing revenue shifted by companies to tax- haven countries, which was widely viewed as a starting point for renewed OECD talks on a global minimum tax. France and Germany backed the 21 percent tax, while other countries have pushed for a lower rate at 12.5%. Britain’s finance ministry stated that an international agreement had been reached on how large digital companies will be taxed. The Ministry added that digital companies’ taxation is a priority.

JCI corrected despite positive trade data announcement
JCI corrected 2.8% last week, despite trade data came in better than expected. Exports increased 52% YoY on Apr’21, higher than the consensus estimate of 38% YoY growth. This had helped Indonesia to book a trade surplus of Rp2.2bn in Apr’21. JCI performance was dragged down by financial, property, and basic material sectors last week. Foreign investors recorded net-sell of Rp139bn in IDX regular market last week with the highest net-sell on BBRI (Rp270bn), PGAS (Rp208bn), and MIKA (Rp113bn).

Indonesia’s 10Y government bond yield increased slightly by 3bps while the spread to US 10Y treasury yield expanded to 4.84% (from 4.80% last week). Foreign investors booked Rp11.8tn outflow from the Indonesia government bond market last week. We maintain our view that the Indonesia bond market would remain muted this week, with potential fluctuation caused by external factors including the US treasury yield movement.