Global Equity Corrected

• US equity down as President Biden proposed a tax hike
• Another sign of recovery for China
• JCI corrected; Indo bond yield decreased

US stock market down, 10Y treasury yield dropped to almost 1.5%
US equity market was down last week – DJIA down by 0.5% and S&P500 down by 0.1%. On Thursday, the biggest one-day drop since March of 0.9% occurred, following the news that President Biden proposed to increase the capital gains tax rate from wealthy individuals. Combined with existing charges and taxes, wealthy individuals could potentially face a 43.4% tax rate if Biden’s plan goes through, according to Bloomberg. On the following day, many analysts downplayed the impact of this proposal, as many felt that a less dramatic tax hike would be introduced instead, considering the tight and long approval process. Consequently, the market rebounded on Friday, though the equity market still closed at a loss overall. Also, following movement from the previous week, US 10Y Treasury yield decreased by 2.21 bps last week to 1.5577%.

Another sign of recovery for China: electricity demand rise in 1Q21
Another sign of economic recovery in China as electricity consumption increased in the country. China Shenhua, the largest coal and coal power company in China recorded higher coal sales volumes of 17.3% YoY in 1Q21 and electricity sales volumes growth of 35.7% YoY despite the company’s coal-power power capacity drop of 700MW from 31.2GW in December 2020, due to the completion of the sale of a 100% equity interest in China Energy Shaanxi Fuping Thermal Power to China Energy Guoyuan Power, while the coal-fired power utilization hours increased to 1,174 in 1Q21 from 881 in 1Q20 and 1,125 in 1Q19.

JCI corrected; Indo bond yield decreased, spread with US bond yield narrowed
Last week, JCI recorded a correction of 1.1%. Only 2 sectors posted a gain during the week: Miscellaneous Industries (6.14%) and Agricultural (2.79%). The rest of the sectors recorded losses, led by Basic Industry & Chemical (3.07%). Correction of 1.1% occurred as there was a net foreign sell of Rp840bn, resulted from the higher expectation that the US market (and other developed markets) will outpace the developing markets as vaccines roll-out fell short and number of COVID-19 cases rose.

In contrast to the previous week, Indo bond yield dropped by 5.90bps to 6.435%, thus narrowing the spread of Indo and US bond yield by 3.69bps. As the spread narrowed last week, we note that USD has become weaker against IDR (down by 0.3%). In our view, this was also supported by the decreasing US 10Y treasury yield, causing market investors to look at bonds

from emerging markets such as Indonesia.