JCI remained strong

• S&P500 corrected from the peak, bond yield down
• G20 issued a new global tax policy due to pandemic
• Indo equity and bond market remained strong

S&P500 and DJI dropped after a three-week rally

US CPI recorded at 5.4% YoY in Jun’21, higher than the consensus expectation of 4.9% YoY. Retail sales in Jun’21 also came in better than expected, with a slight improvement of 0.6% MoM vs. 0.3% contraction expected by consensus, and negative growth of -1.3% MoM in May’21. Despite some positive economic data, S&P 500 dropped 1.31% and DJI decreased by 0.88% last week, after increasing for three consecutive weeks. The oil and gas sector led S&P500 correction with 10.3% losses after a 3.7% correction in West Texas crude oil price, followed by the copper sector with a 9% correction last week. US Dollar index increased 0.6%, while 10Y treasury yield dropped 6.92bps to 1.29% last week, and further decrease today to 1.23%, the lowest level in five months as the delta variant spurred concern that global economic recovery would be slower than expected.

G20 issued a new global corporate tax rate to cope with the pandemic

Since its first outbreak, Coronavirus has developed into variants, originated from different countries. The Delta variant which first found in India, is a threat to global economic recovery due to the virus’ capability to spread at a faster rate. G-20 issued concerns that the Delta variant could hold back economic recovery, especially for countries that have low vaccination rate. This event paves the way for G-20 leaders to finalize a global minimum corporate tax rate at 15%, to stop multinationals shifting profits to low-tax havens. It would also change the way that companies like Amazon and Google are taxed, basing it partly on where they sell products and services, rather than on the location of their headquarters. G20 members account for more than 80% of world gross domestic product, 75% of global trade, and 60% of the population of the planet, including big-hitters the United States, Japan, Britain, France, Germany, and India.

JCI posted a gain, while bond yield down despite the foreign outflow

As healthcare service in Indonesia is struggling to cope with rising Covid-19, JCI managed to book a 0.5% gain last week supported by healthcare (+2.7%) and financial (+2.1%) sectors. Despite the trade balance number came in slightly below consensus expectation (Fig. 1), JCI remained positive as Indonesia recorded the highest daily vaccine distribution of 2.67mn doses (~1% of the population) on 14 July, which spurred expectation that Indonesia could achieve its vaccination target. Thus, foreign investors recorded a net buy of Rp250.1bn in the regular market with the biggest net-buy on TLKM (Rp172bn), AGRO (Rp77.8bn), ANTM (Rp36bn), and INDF (Rp33.8bn).

On the bond market, despite foreign investors’ net-sell of approximately Rp12.5tn, Indonesia’s 10Y government bond yield went down by 19.3bps last week, which indicates strong domestic buying by local investors.