STAR Insight , Market Update 3 Mei 2021

Global Equity Corrected

  • S&P500 up 10% during 100 days under President Biden
  • China’s Industrial Profits almost doubled YoY in Mar’21
  • JCI corrected; Indo and US bond yield spread increased

US stock market down, 10Y treasury yield rose above 1.62% again
US equity market was down again last week – DJIA down by 0.5% and S&P500 did not move much at 0.0% gain. Last Thursday, 29 April, marked the 100th day of President Biden’s presidency. Since his inauguration on 20 January 2021, the S&P500 has seen a growth of a little over 10%. However, in our opinion, the incoming tax hike to fund President Biden’s US$2tn Infrastructure Plan will certainly drag the returns lower over a longer period. At the same time, we also believe there are still catalysts that will drive further growth in the US equity market. For example, many developing markets have come across problems while administering their vaccines, as a result, the vaccine roll-out slowed down and so did the expected recovery time. Consequently, market investors may feel safer investing in less volatile and safer markets such as the United States. In contrast to the previous week, we note US 10Y Treasury yield increased by 6.82 bps last week to 1.6259%.

China industrial profit jumped
Last week economic data released show that China recorded a growth of 92.3% YoY in its Industrial Profits (Fig. 1). Part of this growth was affected by the low base in March 2020, as the pandemic worsened globally. However, March’s industrial profit growth despite doubling was relatively lower compared to the growth recorded in the first two months of 2021. Please note that in the first two months, China’s Industrial Profits grew 179% YoY which was also caused by the lower base in 2M20. China’s economy was the weakest in 1Q20 following its lock-down and Covid-19 outbreak which occurred before other countries. With this data release, we see that China has shown strong pieces of evidence of its economic recovery, this should benefit Indonesia’s raw material exporters (metal, coal, palm oil) to the country.

JCI corrected; Indo bond yield increased, spread widening
Last week, JCI recorded a correction of 0.4%. Only 3 sectors posted gains during the week: Energy (5.94%), Basic Materials (3.12%), and Properties (1.86%). The rest of the sectors recorded losses, led by Technologies & Industrials, both at -2.24%. We note that BBRI, TLKM, EMTK, CPIN, and ARTO were the top laggards, while BBCA and MDKA were the leaders for JCI performance last week.

In contrast to the previous week, Indo bond yield increased by 2.60bps to 6.461%, thus enlarging the spread of Indo and US bond yield by 6.82bps. Despite the US overall economic condition and higher US 10Y Treasury yield last week, we note that USD has grown weaker against IDR at 14,445 IDR per USD.