The S&P 500 finally closed in green after falling for 3 weeks

After experiencing a decline for 3 consecutive weeks, the United States S&P 500 stock market turned green again in trading last week. Even though the Fed's negative sentiment regarding increasing interest rates is still haunting the market, investors see that the decline in interest rate expectations is quite deep, and are starting to take the opportunity to buy again. All sectors experienced increases throughout last week, with the largest increases in the Consumer Discretionary sector at +5.62%, Materials +4.94%, Financials +4.38%, and Healthcare +4.35%. Overall, the S&P 500 index increased by +3.47% last week.

Official fuel prices have risen, putting even more pressure on people's purchasing power

Pertamina increased subsidized fuel prices last weekend by 30.7% for Pertalite (RON 90) to IDR 10,000/liter, 32% for Diesel to IDR 6,800/liter, and 16.0% for Pertamax (RON 98) to IDR 14 ,500/liter. This can reduce the government's financial burden, although this burden will remain if oil prices remain above USD 100/barrel. In this scenario, the fiscal burden will be added by IDR146.6tn, resulting in total expenditure of IDR649tn in 2022 just for energy subsidies & compensation (previously: IDR502.4tn). Despite the lower than expected inflation rate in August and strong PMI, rising gasoline prices will cause inflation to rise. At the next BI meeting, we see the possibility of increasing the BI benchmark interest rate by 50bps.

The government increases the minimum Ojol fee

The government finally increased the minimum fee for online motorcycle taxis (OJOL) effective September 10 2022. After being delayed twice, the government finally decided to increase the minimum fee even though the increase was not as high as the initial plan, where the minimum charge increased from IDR 9k-10k to IDR10.2k -11.2k or 6-13% (vs previous IDR13k-13.5k) and per km from IDR2.25k-2.65k to IDR2.55k-2.8k or 6-13% (vs previous IDR2.6k-2.7k).

Key Takeaways:

After 3 weeks of decline, the US stock market S&P500 returned to the green last week. Investors saw that the decline in interest rate expectations was quite deep, and began to take the opportunity to buy again.

Domestically, inflation still haunts Indonesia due to the increase in fuel prices. Although this can ease the government's financial burden. Even though inflation in August was lower than expected, it cannot be denied that the increase in fuel prices will continue to push up the inflation rate so that the possibility of an increase in the BI benchmark interest rate will be greater. Then, finally the government announced an increase in the minimum cost of online motorbike taxis, which was not as high as the initial plan.

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