No sign of Fed’s tapering yet

• US GDP came in below expectation, stock market down
• No timeline for tapering caused Dollar value to drop
• JCI corrected; bond yield remained muted last week

DJIA and S&P500 weakens as GDP came in below expectation

US GDP growth for the second quarter of 2021 was recorded at 6.0%, better than the prior period of 4.3%, and consensus expectation of 5.4%. However, the annualized QoQ figure of 6.5% came in below the consensus expectation of 8.4%. With this announcement, S&P 500 and Dow Jones were moderately down by 60bps for the week. Consumer Discretion and Communication sectors led the negative performance on S&P500, these sectors were down 3.31% and 1.66%, respectively. US Dollar index was slightly down last week, decreased by 0.5%, while 10Y treasury yield was down 5.4bps to 1.22%. US Dollar and treasury yield eased after the Federal Reserve fails to provide the timeline for tapering Fed asset purchases.

The Fed fails to set the timeline for tapering, Dollar value dipped

The dollar eased on Wednesday after the U.S. Federal Reserve said the economic recovery is on track despite a rise in COVID-19 infections in a policy statement that was upbeat but did not set a timeline for tapering Fed asset purchase. Fed policymakers also said they were moving ahead with discussions about when to reduce the central bank’s $120 billion in monthly bond purchases, a precursor to eventually raising interest rates. The dollar index, which measures the greenback against a basket of six currencies, was 0.149% lower at 92.324, easing off after initially spiking up to 92.766 after the Fed statement was released. The greenback has rallied for the past month, with the dollar index up about 2.3% since a hawkish shift from the U.S. central bank in its June meeting. Elsewhere, the British pound was up 0.15% at 1.3904, holding near a two-week high, with analysts attributing its firm tone to COVID-19 cases in Britain declining over the past seven days.

JCI corrected as foreign investors recorded a net sell

As COVID-19 cases remained high in Indonesia, averaging 40,262 new cases per day (1-week data on Friday), JCI was slightly down by 0.6% last week, with consumer non-cyclical (-4.35%) and healthcare (-2.42%) sectors led the negative performance. There was no significant data announced last week. We view that JCI slightly slumped last week partly caused by slow improvement on COVID-19 cases and limited domestic sentiments. Foreign investors recorded a net sell of Rp621.2bn in the regular market with the biggest net-sell on BBCA (Rp326.5bn), PGAS (Rp220.2bn), ANTM (Rp208.2bn), and TOWR (Rp188.1bn).

On the bond market, Indonesia’s 10Y government bond yield was slightly down by 1.0bps while foreign investors were relatively passive last week with minor net-sell of around Rp20bn.