S&P 500 Jumps 1% on Rising Technology Stock Profits

The United States stock market S&P 500 closed up +1% throughout last week's trading, supported by rising profits from large technology companies such as Amazon, Apple and Facebook. However, investors are currently more focused on the direction of interest rates at the Fed's meeting this week. According to SeekingAlpha, the case in the banking sector, along with economic data showing signs of a slowdown in the US economy, has made market players strengthen their expectations that the Fed may soon end interest rate increases. Meanwhile, according to the CME FedWatch Tool, it shows that the possibility that the Fed will raise interest rates is 94.2%. One of the economic data that is of concern is the initial estimate for US GDP growth in the first quarter which only reached 1.1%, much lower than the 2.6% growth in the fourth quarter of 2022. In terms of inflation, there was no change in March from February, showing that inflation may be on the decline. 6 of the 11 sectors closed green with the largest increases in the Communication Services sector at +3.76%, and Information Technology at +2.43%.

March Trade Balance Surplus

Indonesia's trade surplus in March was reported at USD 2.9 billion, below market expectations of USD 4.2 billion, this was due to slower export growth and increasing imports ahead of the holiday period. This surplus trade balance has persisted for 35 consecutive months. Exports recorded a contraction of -11.3% compared to the previous year, and grew 9.9% compared to the previous month. This contraction was caused by commodity prices normalizing and weaker global demand, which resulted in a decrease in shipments of manufactured products. The import side experienced a contraction of -6.3% compared to the previous year, and grew 29% compared to the previous month. This significant increase was caused by stockpiling influenced by the Eid period.

Growth in Government Revenue and State Expenditures in 1Q23

Indonesian government revenues in 1Q23 increased 29% compared to the previous year, to IDR647.2tn, which makes up 26.3% of the total 2023 budget. This growth was due to strong growth in tax and non-tax revenues. All tax components grew positively compared to the previous period, especially income tax (PPh 21), which was in line with the increase in workers' salaries and the level of tax reporting compliance. Government spending in 1Q23 increased 5.7% compared to the previous year, to IDR518.7tn, or equivalent to 16.9% of the total budget. The Ministry of Finance continues to spend on energy and non-energy subsidies which reached IDR24.5tn and IDR13tn respectively, for subsidies for 3kg LPG gas, fuel, electricity and housing. In addition, in the last month of 1Q23, the Ministry has begun disbursing the Hari Raya Allowance (THR) ahead of the Idul Fitri celebrations in an effort to increase consumption.

Key Takeaways:

The United States stock market, the S&P 500, increased by +1% during trading last week, supported by an increase in profits from large technology companies such as Amazon, Apple and Facebook. However, investors are currently more focused on the direction of interest rates at the Fed's meeting this week. According to SeekingAlpha, the case in the banking sector, along with economic data showing signs of a slowdown in the US economy, has made market players strengthen their expectations that the Fed may soon end interest rate increases. Meanwhile, according to the CME FedWatch Tool, it shows that the possibility that the Fed will raise interest rates is 94.2%.

For the domestic economy, the country's foreign exchange reserves showed a jump of USD 4.9 billion at the end of March, which was the highest increase in the last 16 months. The surge was mainly driven by tax revenues. This positive condition can provide BI with sufficient cushion and flexibility to face the prospect of slowing growth in the future.

In other news, the Government has announced the suspension of truck operations for 12 days during the homecoming period ahead of Eid al-Fitr this year. This is expected to impact manufacturing activity, with manufacturers expressing concerns about additional costs due to backlogs of goods at ports.

ANALYSTS CERTIFICATION

The views expressed in this research report accurately reflect the analysts’ personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

 

DISCLAIMERS

This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. Contents in this research is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on our report and wish to rely upon, whether for the pur-pose of making an investment decision or otherwise. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Surya Timur Alam Raya or its affiliates may seek or will seek investment or other business relationships with entities in this report.