STAR Insight , Market Update 31 Mei 2021

Limited catalyst

  • US equity and bond market were up; US Dollar flat
  • Oil price to remain high as demand improved
  • JCI increased; bond flat as BI maintained interest rate

Limited positive catalyst for US equity and bond market this week
US New Home Sales dropped 5.9% MoM in Apr’21. However, this is better than the consensus expectation of 7.0% correction, despite significantly lower than the prior 20.7% MoM growth recorded in Feb’21. US Personal Spending is in line with the consensus estimate, growing 0.5% MoM in Apr’21, while it cannot beat the prior 4.2% MoM growth recorded in Feb’21. Following this data release, the S&P 500 rose by 0.08% on Friday, resulting in a 0.17% increase for the week. US 10Y bond yield recorded a decrease of 2.7 bps while US Dollar Index was flat last week. US equity market remained on uptrend move. However, we see the lack of positive catalyst for this week, thus, the US equity market will likely be corrected.

Oil price to remain high as demand growth would outstrip supply
Oil prices climbed in early Asian trade, underpinned by the bright outlook for fuel demand growth in the next quarter, while investors look ahead to the OPEC+ meeting this week for supply guidance. Brent crude futures for August rose 44 cents, or 0.6%, to $69.16 a barrel after settling at their highest in two years on Friday. U.S. West Texas Intermediate crude for July was at $66.78 a barrel, up 46 cents, or 0.7%. Both contracts are on track for a second monthly gain as analysts expect oil demand growth to outstrip supply despite the possible return of Iranian crude and condensate exports. OPEC+ is expected to stay the course on its plans to gradually ease supply cuts until July. Separately, crude output in the United States soared 14.3% in March, the Energy Information Administration reported on Friday, while Baker Hughes data showed oil and gas rigs rising for the 10th month in a row last week. EIA’s data also showed that a cargo of 1.03 million barrels of Iranian crude oil was landing on U.S. shores in March, the first shipment of Iranian oil to the United States since 1991.

JCI increased 1.3% lead by the financial sector; bond remained muted
JCI increased by 1.97% last week, as Bank Indonesia maintained the 7-day reverse repo rate at 3.5%, which in line with consensus expectation. Basic materials (+2.93%), Industrials (+2.69%), and financials (+1.63%) sectors were leading JCI’s positive performance last week. Foreign investors recorded a net buy of Rp731bn in the regular market last week. The highest inflow came to ARTO (Rp611bn), BBRI (Rp510bn), and TLKM (Rp166bn).

Indonesia’s 10Y government bond yield decreased by 2.3bps while the spread to US 10Y treasury yield remained relatively stagnant at 4.84%. Foreign investors booked Rp1.64tn inflow to the Indonesian government bond market last week. The bond market will likely remain stagnant this week, in our view.