STAR Insight, Market Update 12 Juli 2021

JCI flat despite rising Covid-19 cases

  • US equity market remained on an uptrend
  • US companies’ earnings growth were likely peaking in 2Q21
  • Indo equity and bond market remained unaffected by rising Covid-19 cases

S&P500 hit another new high

S&P500 rose 0.4% and DJIA up 0.24% last week as jobless claims are higher than expected, edging up in the first week of July, though remained near the pandemic low. Jobless claims in the first week of July ‘21 were recorded at 373k, higher than the previous week of 364k and consensus of 350k. S&P500 was closed at a new record last Friday with gain for the week was led by real estate, consumer discretionary, and utility sectors. US Dollar index corrected by 0.3% following 2.9% gain recorded in June. US 10Y Treasury yield dropped 6.4bps last week due to unappealing labor data and expectation that growth momentum would fade partly caused by the second wave of Covid-19 pandemic.


US companies’ earnings growth is expected to be slower in 2H21

Investors are expecting earnings results of US companies for the second quarter this year, some expect that the recent economic surge is already waning. Earnings growth in the second quarter is expected to be the peak given the low base from last year, while in the upcoming quarters, unexciting labor data and the second wave of the pandemic from the new variants might tamper growth momentum. In the US equity market, the industrials, consumer discretionary, energy, and materials sectors are expected to post the biggest year-over-year profit gains. However, as growth is expected to be slower in the upcoming quarters, the US stock market recorded a selloff in financials, energy, and other sectors which are tied to the economic recovery.

Indo equity and bonds were slightly up despite the second wave of the pandemic hit hard

Despite Covid-19 cases in Indonesia hit a new record of 38.4k new cases on Thursday last week with a weekly average of 34.4k new cases per day, JCI managed to move up slightly by 0.28% with the technology (+4.7%) and healthcare (+4.2%) industries are leading the positive result. Foreign investors recorded a net sell of Rp223bn in the regular market with the biggest net-sell on BMHS (Rp298bn), BBRI (Rp214bn), BFIN (Rp204bn), and BBCA (Rp172bn). Note that financials (-0.47%), industrials (-2.08%), and consumer non-cyclical (-2.69%) sectors posted negative performance last week.

On the bond market, Indonesia’s 10Y government bond yield went down by 2.7bps as foreign investors recorded a Rp2.58tn net-buy to the Indonesian government bond market last week. Please note that despite rising Covid19 cases, Indonesia’s 10Y government bond yield had dropped 24.1bps from the YTD peak of 6.8% in February.