STAR Insight, Market Update 1 November 2021

JCI corrected as foreign inflow slowed

  • Equity and bonds up despite negative data results
  • China developers could spread the crisis overseas
  • JCI slightly down as foreign net inflow continued

US Equity still going up with negative economic data results

US third-quarter GDP grows at 2% annually, lower than market expectation of 2.6%. However, the stock market went up with S&P500 and Dow Jones increased by 1.3% and 0.4%, respectively, last week. The consumer discretionary sector led the positive performance of S&P500 with a 3.98% increase, followed by communication, and technology sectors which booked 2.0%, and 1.9% gains, respectively. S&P500 recorded a 6.9% gain last October while Dow Jones increased 5.8%. US Dollar Index was moving upward last week, increased by 0.32%, while 10Y treasury bond price increased with yield dropped by 8.0bps to 1.55%. Equity and bond prices are going up as investors brace for the tapering decision and inflation worry in the U.S while lower C-19 cases in the U.S. and globally added positive sentiments for the market.

China’s property sector woes could spill over to other cities globally

The problem from China’s property sector could spread to mega-projects in top cities as the developers are scramble for cash. Evergrande’s struggles which dominated the crisis could spill to multi-trillion-dollar global property markets stems from some of its rivals that have spent the last decade competing to build ever taller and grander skyscrapers. Chinese developers recorded significant expansion in the international market between 2013 and 2018. However, the expansion spree slowed significantly following the move by Beijing to curb these firms’ excessive debts. Greenland Holdings, Kaisa Group, Oceanwide Holdings and R&F Properties are the major firms in focus due to excessive debts. But with nearly $8 billion of debt to repay in the next 12 months, only $2 billion of freely available cash and sales were down nearly 30% year-on-year last month.


JCI slightly went down as foreign inflow dropped

JCI booked a 0.8% loss last week and closed at 6.591 on Friday. Consumer non-cyclicals (-3.79%) and transportation & logistic (-1.44%) sectors were leading the negative performance. Foreign investors recorded a net buy of Rp0.7tn in the regular market, lower than the Rp3.3tn net inflow in the previous week. Big-caps stocks are the primary choices with the highest net buy in BMRI (Rp0.4tn), BBCA (Rp0.4tn), and KLBF (Rp0.3tn). Domestic factors remained positive for JCI with lower C-19 cases, causing escalation for mobility, thus helping economic recovery.

Indonesia’s 10Y government bond yield decreased by 1.0bps last week, allowing the spread to US 10Y Treasury yield to widen again to 4.5%. Less bond issuance by the government of Indonesia through the year-end could maintain the bond price to remain strong for the next 1-2 months despite being subjected to volatility risk caused by global monetary policy direction.