STAR Insight , Market Update 10 Mei 2021

US unemployment remained high

  • US market rebound after the weak labor data release
  • China’s April exports beat expectation
  • Consumer sector lead JCI correction; Bond yield dropped

US market rebound as the unemployment rate remained high
US equity market recorded gain last week with DJIA up 2.7% and S&P500 gained 1.2% after data released that US unemployment rate came below market expectation (Fig. 1). The market estimated the US unemployment rate at 5.7% (vs. 6.0% in Mar’21), while the actual number is increasing to 6.1% in Apr’21. This data release raises the expectation that stimulus will still be in place while The Fed is expected to maintain its expansionary monetary policy, which is positive for the global stock market. However, the consensus forecasts US industrial production to record slower growth of 1% MoM in April 2021 vs. 1.4% MoM previously (Fig. 2). It is also worth noting that US inflation data for Apr’21 will be announced this week, the consensus forecasts high inflation of 3.6%, which increases from 2.6% on Mar’21. Higher than expected inflation would be negative for the bond and equity market.

China exports expanded better than expected
Global economic recovery and stalled factory production in other countries had helped increasing demand for China’s goods. China’s export surged 32.3% from a year earlier to $263.9bn, according to China’s General Administration of Customs. This is higher than analysts’ forecast of 24.1% and the 30.6% growth reported in March 2021. US economic growth and the Covid-19 crisis in India had caused some orders to shift to China, according to some analysts. The low base number last year was also the reason behind this rapid growth. Imports jumped 43% YoY, from 38% growth recorded in March. However, China’s iron ore imports fell 3.5% MoM in April, while copper imports dropped 12.2% MoM.

JCI corrected despite foreign inflow; Indo Bond yield dropped
JCI dropped 1.1% last week as the consumer sector recorded a 2% correction. UNVR (-7.9%), TPIA (-7.2%), BMRI (-3.6%), CPIN (-6.4%) and BRPT (-7%) are the biggest laggards for JCI last week, while INCO (+10.6%), MYOR (+6.5%), and ANTM (+5.2%) are the top movers for JCI. Despite the correction, foreign investors recorded an Rp882bn net-buy in the regular market, with the largest net buy on TBIG (Rp303bn), BBCA (Rp233bn), and TLKM (Rp175bn). We expect JCI to rebound this week supported by positive sentiments from the global market. Indonesia 10Y government bond yield dropped 5bps to 6.411%, while Rupiah appreciated 1.1% against the US Dollar. Foreign investors booked Rp1.45tn net-buy to the bond market last week. The bond yield would likely stable in the short term as the weak job market in the US spurred expectation the Fed would maintain interest rate low.