JCI is testing an all-time high resistance

• Mixed data results, US equity up while bonds down
• The stars are aligning for the palm oil price to remain high
• JCI slightly up as foreign net inflow continued
  

US Equity keeps going up with mixed economic data results

Markit US Manufacturing PMI recorded at 59.2 for October, lower than market expectation of 60.5. However, job data is showing an improvement with Initial Jobless Claims in the second week of October recorded at 290k, better than market expectation of 300k, and is the lowest level since March 2020. S&P500 and Dow Jones were up by 1.6% and 1.1%, respectively, last week. The real state sector led the positive performance of S&P500 with a 3.2% increase, followed by healthcare, and Financials sectors which booked 2.9%, and 2.8% gains, respectively. US Dollar Index was moving upward last week, increased by 0.34%, while 10Y treasury bond price dropped with yield increased by 6.2bps to 1.63%. Following economic recovery expectations, we believe the equity market will continue to perform better than the bond market.

Palm oil price likely to remain high due to China power outages

China’s power outage had caused lower soybean crushing which resulted in lower soy oil production and higher palm oil imports from China. This, coupled with increasing imports from India, higher crude oil prices, and relatively flat palm oil production from Indonesia and Malaysia would likely maintain the palm oil supply deficit for some time. On the other hand, upcoming festive seasons in India (Diwali in November), and Chinese New Year on Feb’22 would maintain edible oil demand to remain high until February. Thus, we believe palm oil price would remain high at least until 1Q22. We remain bullish on the palm oil price outlook on the back of additional positive factors including increasing imports from India on the back of palm oil import tax reduction and Indonesia’s higher edible oil consumption in the year-end and bio-diesel consumption following economic re-openings.

JCI went up despite failing to break an all-time high resistance

JCI booked a 0.2% gain last week and closed at 6,644 on Friday while failing to break the all-time high resistance. Financials (+2.52%) and transportation & logistic (+2.11%) sectors were leading the positive performance. Foreign investors recorded a net buy of Rp3.3tn in the regular market, lower than the Rp5.1tn net inflow in the previous week. Foreigners continued to buy big-caps stocks with the highest net buy in BBRI (Rp1.4tn), BMRI (Rp0.5tn), and TLKM (Rp0.3tn). Domestic factors remained favorable for JCI with lower C-19 cases, improving people’s mobility, signs of improving loan growth, and stable Rupiah owing to strong trade balance as commodity prices are high.

Indonesia’s 10Y government bond yield decreased by 2.4bps last week, allowing the spread to US 10Y Treasury yield to narrow further to 4.43%. Indonesia’s government bond continues outperforming its EM peers following a stable Rupiah outlook as 3Q21 Current Account is expected to be positive for the first time after 38 quarters.