Highlight Monthly Commentary - May 2022

13/06/2022
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Macroeconomics

Indonesia 1Q22 GDP booked at 5.01%YoY. Private consumption picked up by 4.3%YoY vs 3.6%YoY in 4Q21 despite omicron wave in 1Q22. Indonesia 4M22 fiscal recorded a surplus of Rp103.1tn (0.58% of GDP) and was accelerated compared to a surplus Rp10.3tn in 3M22. Indonesia 1Q22 BoP recorded a deficit of USD 1.8bn vs 4Q21 deficit of USD 0.8bn. BI kept the policy rate unchanged at 3.5%. The central bank to increase the Reserve Requirement Ratio (RRR) by 100bps to 6% in June 2022, 150bps each in July and September 2022 to 9%.

Equity

JCI declined by 1.1% in the past one month with around Rp 3.5tn net foreign sell. The index was deeply corrected after the Hari Raya holiday due to foreign pressure. The global concern on central bank tightening, persistently high inflation and higher global political tension triggered the investor to took profit in Indonesia market. The market slowly recovered and trimmed its losses as Indonesia macro data continued to be solid, no jump in covid cases and CPO export ban was lifted. The Best Index performer was IDXTransportation (+21.8%) as economic activity resumed and mobility was higher. IDXEnergy (+8.1%) posted a solid performance lifted by high coal prices amid the geopolitical tension.

The global indices mixed with the western market concerning on inflation while the China market was cautious on growth slow down due to covid. High energy prices and employee cost has taken a hit to corporate earnings. The oil price was climbing as EU was preparing a plan of Russian oil ban.

We remain positive on equities as the fundamental reform and recovery story remains intact. However, we are cautious in the short term due to risk form the Ukraine-Russia tension and potential rise of inflation in Indonesia. Any additional sanctions on Russia may add global inflationary pressure and risk to derail growth. Covid cases are more manageable in Indonesia at the moment with lower hospitalization and mortality rates compared to during the Delta outbreak.

Fixed Income

Indonesia 10 years government bond yield increased 5bps to 7.04% compared to the previous month. In comparison, the US 10-year treasury note decreased by 8.1bps to 2.853%. The US treasury yield declined after the inflation data was announced; the street saw that inflation was peaking despite it was higher than expectation. Fed minutes showed that the officials were planning to increase the policy rate by 50bps each in the next couple of meetings. Based on DMO bond flow data as of May 27, Foreign ownership recorded at 16.5% of the outstanding and outflow of Rp100.1tn YTD. Indonesia 10 years USD global bond yield at 3.92%. IDR slightly weakened to 14,581.

Higher inflation and rising interest rates would pressure the bond market. In addition, the current tension in Ukraine may push up commodity price and inflation. We think local investors will be the main supporter of IndoGB in the near term while foreign investors would be in defensive mode as inflation risk remains.

 

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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 licensed and supervised by Indonesia 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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