Highlight Monthly Commentary - July 2021

05/08/2021
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Macroeconomics

July inflation was booked at 1.52% YoY where on a monthly basis inflation was booked at 0.08% MoM driven by food, education, and healthcare related inflations. June trade balance remained positive albeit narrower at USD1.3bn due to stronger imports. Budget deficit reached 1.72% of GDP as of June. Forex reserve rose to USD137.1bn in June while Bank Indonesia maintained its policy rate at 3.50% during the month.

Equity

 JCI index posted slight positive return in July of 1.4% MoM. Foreign investors posted inflow of USD67mn in July. The market faced volatility in the month of July due to the new wave of Covid-19 in Indonesia where cases and infection rates reached new records while the government implemented stricter mobility restrictions. However, sentiments improved as Indonesia seems to have passed the peak and showed improvements in terms of daily cases. Meanwhile, the Fed remained dovish and accommodative with its policies in the last FOMC meeting.

Global equity market posted mixed returns in July. The US market recorded positive returns on the back of softer inflation concerns and solid vaccination progress. The European continued to post positive returns as economy reopening and vaccination progress well in the region. The Asian markets were under pressure due spread of Delta variant of COVID-19 in the region while China market was facing a sell-off due to government tightening in its private sector.

In the long term on the equity market is backed by ongoing reforms, attractive valuation, and potential additions of new economy stocks in the market. We need to continue to monitor the current Covid-19 conditions in Indonesia as we are seeing improvements with cases and infection rates seemingly passing its peak. We also need to monitor statements from the Fed on any signs of taper talks.

Fixed Income

Fixed Income market’s performance was positive in July as the 10-year government bond yield fell from 6.56% to 6.29%. The bond market posted foreign outflow of USD592mn in July. Despite the new wave of COVID-19 infections in Indonesia, the bond market performed well supported by stronger auction demand, dovish Fed statements, and expectations of easing US inflation. Meanwhile, government’s plan to trim issuance also help give positive sentiments to the bond market. Meanwhile, the US Treasury yield fell to 1.23% while the INDON31 yield closed at 2.14%.

We think that US inflation should start to peak soon which would ease volatility surrounding the US Treasury yield as well as giving time for the Fed before actually conducting tapering. However, lack of catalysts, fiscal headwinds, and resurgence of COVID-19 cases may cause volatility and limit upsides at this juncture.

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This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can goes down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable, but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  PT Schroder Investment Management Indonesia, 30th Floor IDX Building Tower 1, Jl. Jend. Sudirman Kav 52-53, Jakarta 12190, Indonesia. PT Schroder Investment Management Indonesia is authorised as Investment Manager and regulated by Indonesian Financial Services Authority (OJK).

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DISCLAIMER

INVESTMENT IN MUTUAL FUND INVOLVES RISK. PRIOR TO DECIDING TO INVEST, PROSPECTIVE INVESTORS MUST READ AND UNDERSTAND THE FUND PROSPECTUS. PAST PERFORMANCE DOES NOT GUARANTEE / INDICATE FUTURE PERFORMANCE.

The views and opinions contained herein are those of the author(s) on this page and are not necessarily represent views expressed or reflected in other Schroders’ communications, strategies or products. This material is intended to be for information purposes only and is not intended as promotional material in any respector offer or solicitation for the purchase or sale of any financial instrument. This material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations [and also may not be circulated, published, reproduced or distributed to any other person without our prior written consent]. Reliance should not be placed on the views and information in this material when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can goes down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Some information quoted herein was obtained from external sources we consider to be reliable. Information herein is believed to be reliable, but Schroders does not warrant its completeness or accuracy. No responsibility both directly and indirectly can be accepted for errors of fact obtained from third parties or negligence of or loss resulting from the use of this material. The data disclosed in this material may change according to market conditions. If any regions/sectors are shown in this material, such data is for illustrative purposes only and should not be viewed as a recommendation to buy/sell. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know and include some forecasted views. However, there is no guarantee that any forecasts or opinions disclosed in this material will be realised. These views and opinions herein are our current views and may change without notice. Nevertheless, this disclaimer does not exclude any duty or liability that Schroders has to its customers under the prevailing laws and regulations in the Republic of Indonesia. PT Schroder Investment Management Indonesia, 30th Floor Indonesia Stock Exchange Building Tower 1, Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia. PT Schroder Investment Management Indonesia as an Investment Manager is licensed and supervised by the Indonesian Financial Services Authority (OJK).

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