Technology Sector Supports S&P 500 Gains in the First Half of 2023

During the first half of 2023, the S&P 500 index has recorded a gain of 15.90%. The main catalyst for the benchmark index's rise in the first half of the year has been the increase in technology stocks driven by the hype surrounding Artificial Intelligence (AI) and improved earnings of technology companies. After experiencing significant declines throughout 2022, technology sector stocks have seen a 42% increase. Looking ahead to the second half of 2023, Federal Reserve Chair Jerome Powell continues to signal that further interest rate hikes are likely, and the central bank's latest dot plot indicates that policymakers anticipate two more rate hikes by the end of this year.

June PMI Rises to 52.5

The S&P Global Indonesia PMI rose from 50.3 in May to 52.5 in June. This expansion was driven by an increase in new orders in June, with improved domestic demand conditions supporting growth. However, demand from overseas continued to experience a slight decline. Meanwhile, input cost inflation, although still high, decreased to its lowest level since October 2020, providing some relief for companies in terms of production costs. Furthermore, in June, the average selling prices declined for the first time in 32 months, as some companies offered discounts to boost sales. All these indicators suggest an improvement in purchasing power expected to continue into the third quarter of 2023.

Money Supply (M2) Grows by 6.1%

Bank Indonesia (BI) reported an increase in the money supply (M2) to Rp8.332 trillion in May 2023, growing by 6.1% year-on-year, surpassing the previous month's growth of 5.6%. This growth was mainly influenced by developments in credit distribution. Credit distribution in May 2023 grew by 9.4% year-on-year (YoY), increasing compared to the previous month's growth of 8.1% YoY, in line with improved developments in productive and consumptive credit. On the other hand, net foreign assets grew by 9.2% after growing by 11.0% YoY in the previous month. Meanwhile, net claims on the Central Government contracted by 19.8% YoY after contracting by 25.3% YoY in the previous month.

Key Takeaways

During the first half of 2023, the S&P 500 index has recorded a gain of 15.90%. The main catalyst for the increase in the benchmark index during the first half of this year was influenced by the rise in technology shares from the Artificial Intelligence (AI) hype and improving technology company revenues. After experiencing many declines throughout 2022, technology sector shares experienced an increase of 42%.

For the domestic economy, PMI S&P Global Indonesia increased from 50.3 in May to 52.5 in June. This expansion was driven by an increase in new orders that occurred in June, where better domestic demand conditions were a supporting factor for growth. In other economic news, Bank Indonesia (BI) recorded an increase in the money supply in circulation which reached IDR 8,332 trillion in May 2023. Economic liquidity, as measured by money in circulation (M2), grew by 6.1% on an annual basis, exceeding the previous month's growth of 5.6%.

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