STAR Insight, Market Update 09 Agustus 2021

Strong GDP pushed JCI up

  • US data announcements favored stocks over bond
  • Strong US jobs numbers; sector rotation might occur
  • Indonesia recorded above expectation GDP growth in 2Q21


Mixed data results, US stock market up while bond decrease

Markit US Manufacturing PMI was recorded at 63.4 in Jul’21, slightly better than Jun’21 number and consensus expectation, both at 63.1. However, the US trade balance during the month, recorded at -$75.7B, came in below the consensus expectation of -$74.0B. With these announcements, S&P 500 and Dow Jones were up by 1.1% for the week. Financials and Utility sectors led the positive performance on S&P500, increasing by 3.65% and 1.52%, respectively. US Dollar index was slightly down last week, decreased by 0.49%, while 10Y treasury yield increased by 7.46bps to 1.29%. The US stock market’s positive performance was also supported by a significant increase in jobs number in Jul’21.


Significant climb in the jobs number

Stronger than expected jobs number for July has bolstered the case for investors who believe Treasury yields will head higher over the rest of the year, potentially weighing on an equity rally that has taken stocks to record highs. The yield on the benchmark 10Y Treasury, which move inversely to prices, stood at about 1.3% on Friday, their highest level since July 23, after Labour Department data showed the U.S. economy added 943,000 jobs last month. Among the implications of higher yields could be a drag on tech and growth stocks with lofty valuations, but could also boost the appeal of so- called value stocks – shares of banks, energy firms, and other economically sensitive companies that hurtled higher earlier in the year but have struggled in the last few months. This data growth could make dollar-denominated assets more attractive to yield-seeking investors. On the other end, a stronger dollar can be a headwind for U.S. exporters because it makes their products less competitive abroad while hurting the balance sheets of domestic multinationals that must convert foreign earnings into dollars.


Positive GDP result, JCI up by 1.8%

Indonesia recorded 7.07% growth (YoY) on GDP in 2Q21, above the consensus expectation of 6.72%. The strong numbers in 2Q21 revealed that economic recovery in Indonesia will be swift as lock-downs are lifted. Based on this result, JCI increased by 1.8% last week, breaking its technical resistance with financials (4.37%) and transportation and logistics (3.2%) sectors led the positive performance. Foreign investors recorded a net buy of Rp925bn in the regular market with the biggest net-buy on BABP (Rp393.3bn), ASII (Rp283.8bn), BBRI (Rp268bn), and BBCA (Rp234.3bn).

On the bond market, Indonesia’s 10Y government bond yield was relatively flat, decreased by only 0.7bps last despite foreign investors booked a net buy of Rp11.9tn to Indonesia’s government bond market last week, supported by positive GDP numbers.