STAR Insight, Market Update 13 September 2021

US inflation in the spotlight

  • US PPI and job data were positive, while equity and bond prices corrected
  • Energy stocks corrected as Delta variant cases increases
  • Sectoral rotation in JCI as C-19 cases dropped


US Market corrected as PPI and Job data are positive

PPI Final Demand in August was recorded slightly higher than market expectation. The market expects prices to increase by about 0.6% MoM, while the actual increase was 0.7% MoM in Aug’21. However, jobless claims came in at 310k last week, better than the market expectation of 335k. Despite positive economic results, S&P 500 and Dow Jones were down by 1.7% and 2.2% last week. Real estate, health care, and industrial sectors were the worst-performing sectors on S&P500, decreasing by 3.89%, 2.73%, and 2.52%, respectively. US Dollar index was slightly down last week, decreased by 0.4%, while 10Y treasury yield increasing by 1.8bps to 1.34%. US inflation number for Aug’21 will be reported tomorrow, the market expects inflation would be slowing down to 5.3% YoY, from 5.4% recorded last month. Higher than expected inflation would be negative for the global market, in our view, as this could translate to sooner tapering.

Energy stocks wobble as fears for Delta variant sharpen

Energy stocks are becoming a popular bellwether for concerns over how deeply the Delta variant of the coronavirus is expected to impact the U.S. economy, as the so-called reopening trade that boosted some parts of the market earlier this year continues to stumble. S&P 500 energy sector is down 12.3% for the quarter-to-date compared with a 3.7% gain for the S&P 500, which stands near record highs. That contrasts with the sector’s performance in the first quarter of the year when it zoomed 29.3% on expectations that a vaccine-fuelled economic rebound will boost energy demand. Investors believe the U.S. economic recovery may have peaked in the face of a coronavirus resurgence. The energy sector also faces the prospect of tougher emission standards from the Biden administration and rising demand for electric vehicles.

Foreign inflow to Indo’s old economy stocks as C-19 cases dropped

JCI down to 6,095, dropped by 0.5% last week, with technology (-3.30%) and consumer cyclical (-1.83%) sectors lead the negative performance. Foreign investors recorded a net buy of Rp1tn in the regular market with the biggest net-buy on BBCA (Rp336.4bn), TLKM (Rp273.8bn), ANTM (Rp230.1bn), and ASII (Rp162bn). Indonesia’s daily C-19 cases were going down further to 5.5k daily average, causing old economy stocks to outperform technology stocks.

Indonesia’s 10Y government bond yield increased by 3.9bps last week despite a foreign inflow of Rp1.61tn to Indo’s government bond market. US tapering will have a direct impact on the global bond market but with a lesser impact on Indonesia’s bond market given the current low foreign ownership.