Impact of Chinese Property Developers; S&P 500 falls 2%

The United States stock market, the S&P 500, closed down by -2% throughout last week's trading. Market sentiment was heavily influenced by developments in China's property sector and increasing concerns that US interest rates may remain high for longer than previously expected. China Evergrande, the world's most indebted property developer, filed for bankruptcy in the United States. The move has raised concerns about the possible impact on China's economy, which is already facing deflationary pressures. Meanwhile, a rise in treasury yields has pushed the 30-year fixed mortgage rate past 7% this week. This increase raises concerns about housing affordability, potentially bringing challenges to the housing sector.

July Trade Surplus Shrinks to $1.3 Billion

The trade surplus in July narrowed to $1.3 billion, compared with a figure of $3.5 billion in the previous June. This figure was below the consensus estimate which previously projected a surplus of $2.6 billion. The main cause of this decline was the level of imports which turned out to be higher than expected. Resulting in the total surplus for the first seven months of 2023 reaching $21.4 billion, which marks a decrease of 26.6% from the previous year. From the export side, the contraction in Non Oil & Gas (NOG) was triggered by a decline in exports of main commodities such as coal by -43% YoY, and CPO by -24% YoY. In terms of imports, the capital goods import segment jumped 19% YoY, mainly triggered by an increase in imports of machinery by 11.3% YoY, ships by 1775% YoY, and vehicles by 14.9% YoY.

Ministry of Finance Allocates Higher Budget for Food Security

The Ministry of Finance stated that it plans to allocate a larger budget next year to support food security. This budget is planned to increase by 7.8% to reach a total of IDR108.8 trillion, compared to the previous figure of IDR100.9 trillion in 2023. This budget allocation plan will be divided between the central government and regional governments, with a portion of IDR89.6 trillion allocated to the central government, while IDR19.2 trillion will be distributed to regional governments. The budget will be used to provide assistance for plant seeds, agricultural machinery, agricultural insurance, fertilizer subsidies, as well as construction of irrigation networks and water sources.

Key Takeaways

The United States stock market, the S&P 500, closed down by -2% throughout last week's trading. Market sentiment was heavily influenced by developments in China's property sector and increasing concerns that US interest rates may remain high for longer than previously expected. China Evergrande, the world's most indebted property developer, filed for bankruptcy in the United States.

For the domestic economy, the trade surplus in July narrowed to $1.3 billion, compared with a figure of $3.5 billion in the previous June. This figure was below the consensus estimate which previously projected a surplus of $2.6 billion. The main cause of this decline was the level of imports which turned out to be higher than expected.

In other economic news, the Ministry of Finance stated it plans to allocate a larger budget next year to support food security. This budget is planned to increase by 7.8% to reach a total of IDR108.8 trillion, compared to the previous figure of IDR100.9 trillion in 2023.

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