STAR Insight, Market Update 23 Agustus 2021

JCI dropped despite the foreign inflow

  • U.S. stock market dropped; treasuries up
  • Delta outbreak in the US shadowing the tapering decision
  • JCI down despite foreign inflow and C-19 cases were down


US stock dropped while treasuries up due to tapering alert

Industrial production in July was indicated to be increased by 0.9% MoM, above market expectation of 0.5% MoM, while jobless claims record a positive performance, 348k jobless claims compared to 364k market expectation for the second week of August. Fear of early tapering decision by the Fed brought the S&P 500 to decrease by 0.6% and Dow Jones by 1.1% last week. Materials and Energy sectors led the negative performance on S&P500, dropping by 7.33% and 3.1%, respectively. US Dollar index was slightly down last week, decreased by 0.45%, while 10Y treasury yield decreased by 2.17bps to 1.25%. We note that the negative performance on stock is partly due to the cautious approach on tapering decisions by the Fed which drive investors to move away from risky assets.


C-19 Delta variant as deciding factor for tapering timeline

Federal Reserve officials concluded that the inflation goal has been attained, but still need progress on the employment mandate, as the record of meeting from July showed. U.S. central bankers stated that the economy “has made progress” toward its goals of sustainable 2% inflation and maximum employment. Fed policymakers have differed publicly on the tapering decision and timeline, but most agree that they could start slowing the bond purchase later this year, judging from U.S. progress on inflation and employment. However, the Delta variant of Covid-19 is a factor to decide whether the Fed should slow down on bonds purchase this year since it can make all businesses re-evaluate business plans. U.S. central bankers’ next meeting is on 21-22 September 2021. The recovery has been strong with inflation rose at 4%, higher than the Fed’s 2% target, while the employment rate remained lower than the pre-Covid level with employment to population ratio at 77.8% last month, lower than 80.5% at the start of 2020.


JCI dropped 1.8% while foreign investors recorded Rp 2tn net buy

JCI dropped further by 1.8% last week to 6,030, with technology (-11.49%) and energy (-4.44%) sectors dropped the most. Foreign investors recorded a net buy of Rp2.17tn in the regular market with the biggest inflow to BBCA (Rp1.41tn), BUKA (Rp657.5bn), TLKM (Rp480bn), and TBIG (Rp128.4bn). Nonetheless, we note more positive news as Jakarta has been included as a green zone and meet the condition for herd immunity, as Vice Governor Riza Patria stated on Sunday, 22 August 2021, while today’s national C-19 new cases recorded below 10k for the first time since 16 June 2021.

Indonesia’s 10Y government bond yield increased 0.5bps as foreign investors recorded a net sell of Rp410bn from Indonesia’s government bond market last week. However, we view bond yield would likely stable this week.