The Fed's Sentiment Holds Interest Rates, S&P 500 rises 1.4%

The United States stock market, the S&P 500, closed up 1.4% throughout last week's trading. This increase is consistent with the hope that the Fed will delay raising interest rates is a stronger sentiment than fear investors in the banking sector. Last Wednesday, the Fed raised its benchmark interest rate by 25 basis points (0.25%), accordingly with expectations of consensus. Market participants predict the Fed will raise another 25 bps (0.25%) in May, it is then expected to pause and maintain this range until the end of the year. From the Fed's own comments, they said there would be no rate cut this year. Nonetheless, the Fed Funds Futures data shows predicted a 48.1% probability in July that the Fed would cut interest rates by 25 bps. 9 of the 11 S&P 500 sectors closed green last week, with the biggest gain in the Communication Services sector as much as +3.4%, and the Energy sector as much as +2.29%.

Working Capital Loans Slow, Investment Loans Drive Banking Growth in February 2023

The growth of working capital loans in Indonesia will slow down in February 2023. Loan growth banking system is relatively flat with growth of 10.4% YoY and 1% MoM, YTD has experienced a decline of 0.6%. MoM growth was driven mainly by investment loans which grew by 1.9% mom and 11.8% yoy. However, working capital loans only grew by 10.1% yoy and 0.7% mom and decreased by 2.5% YTD. Investment loan growth was driven primarily by the manufacturing segment which increased by 23% YoY in February 2023. Retail customers start moving their savings accounts to term deposits. Total deposits grew by 9.1% yoy. Savings grew by 5% yoy, while time deposits grew by 6% yoy. Account growth newspaper (CA) is still the highest among its types, at 19% YoY. Loan interest rates continue to lag behind deposit interest rates since the interest rate hike on Aug-22. Since then, loan interest rates have increased by 40bps to 9.34%, while short and medium term deposit rates have increased by 125 bps and 141 bps respectively to 4.14% and 4.41% respectively.

IMF Projections for Indonesia's Growth; Bapanas Imports 500 thousand Tons of Rice

According to IMF projections, Indonesia's economy will remain strong and grow by 5% in 2023, lower than the realization in 2022 of 5.3%, supported by high prices for most of Indonesia's export commodities. Growth The Indonesian economy is supported by lower inflation from monetary and fiscal policies. IMF assesses that the Indonesian government has succeeded in reducing the budget deficit in 2022 below 3% of GDP, reaching 2.4% of GDP. In other economic news, the National Food Agency (Bapanas) reportedly assigned Perum Bulog to imported an additional 500 thousand tons of rice, even though it is currently in the middle of the rice harvest season. This import is intended for stock availability and preparations for Eid al-Fitr celebrations. According to Bapanas, additional rice supplies will be used to stabilize the supply and price of rice, as well as for rice assistance for 21.35 million beneficiary families and other needs. However, the emergence of news regarding these import figures received strong protests from farmers.

Key Takeaways:

The United States stock market experienced an increase of 1.4% due to the Fed's expected sentiment delay the increase in interest rates. Last week, the Fed has raised its benchmark interest rate by 25 basis points. The market predicts there will be an increase of 25 bps in May, then maintained until the end of the year. in May, then maintained until the end of the year. Fed Funds Futures data shows a 48.1% probability in July that the Fed will do cut interest rates by 25 bps. Last week, Communication Services sector and Energy sector recorded the largest increase of 3.4% respectively and 2.29%.

For the domestic economy, growth in capital loans employment in Indonesia experienced a slowdown in the month February 2023. MoM growth driven primarily by investment loans which grew by 1.9% mom and 11.8% yoy. However, working capital loans are only growing amounting to 10.1% yoy and 0.7% mom. Retail customers start move their savings accounts to deposits futures. Loan interest rates still lag behind interest rates deposit interest. Bapanas assigned Perum Bulog to imported an additional 500 thousand tons of rice, although currently is in the middle of the rice harvest season. Import this aimed at stock availability and preparation for Eid al-Fitr celebration.

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