STAR Insight, Market Update 8 November 2021

Tapering without tantrum

  • US equity & bond went up after the Tapering announcement
  • US government to boost infrastructure spending
  • JCI slightly down as foreign net inflow slowed


Tapering without tantrum; US Equity and Bond market up

US Markit Manufacturing PMI recorded at 58.4 in October 2021, lower than the market expectation of 59.2. The Fed maintained Interest Rate at 0.25% while deciding to reduce Treasury purchases by US$10bn and mortgage-backed securities by US$5bn totalling the reduction of the bond-buying program by US$15bn per month starting later this month. Following this news, the stock market and bond market went up. S&P500 and Dow Jones increased by 2% and 1.4%, respectively, last week. The consumer discretionary sector led the positive performance of S&P500 with a 4.99% increase, followed by technology, and materials sectors which booked 3.3%, and 3.2% gains. US Dollar Index was moving upward last week, increased by 1.13%, while 10Y treasury bond price increased with yield dropped by 10.0bps to 1.45%. The positive sentiment partly came from US Senate approval of the US$1.2 trillion Bipartisan Infrastructure Bill on Friday.


The House agreed on the US infrastructure Bill

Commodity prices (metal and energy) obtained another boost from the passing of the US’ largest-in-decades Infrastructure Bill. WTI oil prices rebounded 3% last Friday following a two-week correction after oil prices reached a 7-year high in October. Natural gas, nickel and copper prices also increased last Friday following the announcement of the passing of this Bipartisan Infrastructure Bill totalling more than US$1.2tn, which includes $550 billion of fresh spending on infrastructure projects in coming years. The extra $550 billion budget is planned to revitalize U.S. transportation systems, roads and bridges, internet connections, and environmental spending, mostly in the next five years. The bill passed after months of wrangling between political powers in The US. This could be an indicator for smooth agreement between Democrats and Republicans for the US debt ceiling agenda in December.


JCI corrected as foreign inflow slowed

JCI slightly corrected by 0.1% last week and closed at 6.582 on Friday. Industrials (-1.96%) and technology (-0.50%) sectors were leading the negative performance. Foreign investors recorded a net buy of Rp0.6tn in the regular market, slightly lower than the Rp0.7tn net inflow in the previous week. Big-caps stocks are still the primary choices with the highest net buy in KLBF (Rp0.6tn), BMRI (Rp0.3tn), and BBRI (Rp0.2tn).

Indonesia’s 10Y government bond yield increased by 0.6bps last week, allowing the spread to US 10Y Treasury yields to widen again to 4.6%. However, we expect government bonds would remain strong for the next 1-2 months due to less issuance by the government.