Schroders Indonesia Monthly Market Recap & Commentary – April 2023

JCI gained 1.6%MoM to 6,916 amid almost Rp12.3tn net foreign buy. Foreign inflow kept coming to JCI amid solid macro background and corporate earnings. Strengthening Rupiah was another catalyst for the inflow. Indonesia 3M23 fiscal recorded a surplus of Rp128.5tn or +0.61% of GDP. March trade surplus declined to USD2.91bn from USD 5.48bn in Feb. BI kept the policy rate unchanged at 5.75%. April inflation decelerated to +4.33% from +4.97% in March. Watch the video and find out more about the market below.



April was a short working month for Indonesia due to extended Hari Raya Holiday. The government extended the holiday to avoid congestion during the homecoming activities. During the holiday, PDI-P officially nominated the Central Java Governor Ganjar Pranowo as the presidential candidate for 2024 election. A few days later, PPP also supported Mr. Pranowo candidacy to run for 2024 election. As of the end of April, Indonesia would have at least 3 presidential candidate for 2024 election: Ganjar Pranowo, Prabowo Subianto (support by Gerindra and PKB party), and Anies Baswedan (supported by Nasdem, Demokrat and PKS party).

Indonesia 3M23 fiscal recorded a surplus of Rp128.5tn or +0.61% of GDP. Revenue increased 29.2%YoY to Rp647.2tn while spending increased 5.7%YoY to Rp518.7tn. Indonesia March PMI improved to 51.9 from 51.2 in February. Indonesia March consumer confidence index increased to 123.3 from 122.4 in the previous month.

Indonesia March trade surplus declined to USD2.91bn from USD 5.48bn in Feb. MoM basis, export rose 10% while import rose 29% due to higher capital goods import. Export declined 11.3%YoY due to easing commodity prices and weakening global demand. Import declined by 6.26%YoY due to lower oil price. On quarterly basis export growth decelerated to +1.6%YoY in 1Q23 from +8%YoY in 4Q22 while import declined by 3.3%YoY in 1Q23.

BI kept the policy rate unchanged at 5.75%. The central bank reiterated its view that inflation would be less than 4% at the end of 3Q23 and core inflation at around 3% FY23. BI’s policy rate decision has incorporated FFR assumption of up to 5.5% for this year. Indonesia March forex reserve recorded at USD 145.2bn from USD 140.3bn in the previous month. Indonesia April inflation decelerated to +4.33% from +4.97% in March. Inflation increase was moderate of +0.3%MoM, despite festivity season, thanks to manageable food and transportation cost. Core inflation decelerated to +2.83%YoY vs +2.97%YoY in the previous month.


Local Market

JCI gained 1.6%MoM to 6,916 amid almost Rp12.3tn net foreign buy. Foreign inflow kept coming to JCI amid solid macro background and corporate earnings. Strengthening Rupiah was another catalyst for the inflow. On the other hand, local investors took profit ahead of long Hari Raya holiday. The best performing sector was IDXProperty (+1.9%) as BI policy rate was peaking and marketing sales booked higher. The second best performer was IDXIndustrial (+1.8%) buoyed by automotive counter with stronger then expected sales. The worst index performer was IDXTechnology (-3.2%). IDR appreciated by 2.17%MoM vs USD to 14,670.

Global Market

DJIA 34,098.16(+2.5%); S&P 500 4,169.48(+1.5%); NASDAQ 12,226.58(+0.0%).Stocks gain on better than expected earnings results amid slowing US GDP. Over half of S&P500 have reported earnings and 80% beat consensus expectation. US 1Q23 GDP growth decelerated at +1.1%QoQ vs expectation at 2% and previous quarter GDP at +2.6%. Consumer spending increased 3.7%, export up 4.8% while gross private domestic investment declined 12.5%. March CPI increased +0.1%MoM/+5%YoY vs expectation of +0.2%MoM/+5.1%YoY. Core inflation increased 0.4%MoM/+5.6%YoY. March nonfarm payroll added 236 jobs vs 238k expectation and February job addition of 326k. The unemployment rate inched lower to 3.5% and average hourly earnings increased 0.3%MoM. US April consumer confidence index declined to 101.3 from 104 in March; the lowest level since July 2022.

NIKKEI 28,856.44 (+2.9%); Hang Seng 19,894.57 (-2.5%); Shanghai Comp 3,323.28 (+1.5%); Straits Times 3,270.51 (+0.4%); FTSE Malay KLCI 1,415.95 (-0.5%); KOSPI 2,501.53 (+1.0%). The Bank of Japan kept its interest rate unchanged at -0.1% and the Yield curve control remained the same i.e 50bps above and below the target range of 0%. Japan household spending declined by 2.4%MoM in February. Japan March CPI increased 3.1%YoY. Singapore retail sales rebounded in February with +12.7%YoY from -0.8% decline in January. Singapore core inflation decelerated to +5%YoY from +5.5% in February. Headline inflation also decelerated to +5.5%YoY from +6.3%YoY in February. Singapore property sector declined as the country to increase stamp duties for domestic buyer on second and subsequent purchases as well as foreign purchases to cool prices. South Korea's March PMI declined to 47.6 from 48.5 in February. It was the lowest reading since September 2022 and 9th consecutive month of reading below 50. Bank of Korea kept interest rates unchanged at 3.5%, in line with expectation. South Korea 1Q23 GDP grew 0.8%YoY/+0.3%QoQ. China March inflation increased 0.7%YoY vs +1%YoY expectation. China March trade balance recorded a surplus of USD88.19bn (vs expectation of USD39.2bn) with Export +14.8%YoY (-6.8% decline in Feb) and import declined by 1.4%YoY.

FTSE 100 7,870.57(+3.1%); CAC 40 7,491.5 (+2.3%);DAX 15,922.38 (+1.9%). European banking stocks gained as the companies reported stronger than expected 1Q results from higher interest rate. Euro zone 1Q23 GDP grew by 0.1%QoQ/+13%YoY vs expectation of +0.2%QoQ/+1.4%YoY. UK March inflation increased 10.1%YoY from +10.4%YoY increase in February. On monthly basis, inflation increased 0.8%MoM from +1.1%MoM in February. Core inflation increased 5.7%YoY. UK March retail sales dropped 0.9% vs -0.5% expectation and +1.1% in February. German PPI declined 2.6%MoM/+7.5%YoY.

Equity Outlook & Strategy

We remain cautiously positive on equities as Indonesia still offers solid fundamentals from both macro and corporate earnings sides. However, we expect continuing volatility in the market following global recession fears on the back of higher inflationary environment, noises from the US banking crisis, and geopolitical situation. The Rupiah has rebounded thanks to recent export proceeds repatriation regulation issued by Bank Indonesia and resilient trade surplus. Foreign flow has been strong to both bond and equity markets. Meanwhile, concerns on US economy also has been putting the USD under pressure. Thus, strong currency and macro position thus far would continue to support the market for the time being.

One macro data we would need to monitor is domestic demand as declining commodity prices would mean economic growth will rely from domestic demand rather than net exports. However, early data seems to indicated domestic demand to be rather modest in 1Q23. The Lebaran season also showed lower jump in consumption compared to previous years. Hence, this could be a potential risk to Indonesia’s GDP growth if the trend continues. However, we note that the government seems to have start pushing for social spending as we are entering mid-year which would help support consumption going forward. As we are entering election period later in the year, we think that more social spending during campaign periods by candidates would also help drive consumption.

Geopolitics between China, the US, and Taiwan is another point need to be monitored as it continues to brew. Heightened political tension and any disruptions in trade may keep inflation elevated while in the same time slow down economic growth. Hence, posing a risk of stagflation. Though we think commodity price would remain stagnant despite any rise in geopolitical tension as demand is relatively weak at the moment. The US economy is facing major challenges with the ongoing banking crisis and looming debt. We think that impact to consumers from the ongoing banking crisis will lag and will be fully seen in the next few weeks or months. As the Fed is expected to start pausing rate hikes, we think that it is a sign that the economy is in bad shape. Thus, we think sentiments in the global market would remain as major noises to overall equity market in the near term.


Indonesia 10 years government bond yield decreased by 26.1bps to 6.532% as compared to the previous month. In comparison, the US 10-year treasury note decreased by 4bps to 3.433%. The UST yield climbed in the first week of the month amid persistently high core inflation and March nonfarm payroll data of 236k job addition. However, the Treasury yield drifted lower along with weaker than expected US GDP data, indicating Fed’s tightening pace has impacted the market and peak of Fed Fund Rate hike might be near. Fed’s March minutes of meeting showed that all participants agreed that continuing balance sheet reduction was warranted, the Fed expected mild recession this year with recovery taking 2 years, banking sector stress was likely to lead to a reduction in lending from banks, core and total PCE price inflation was expected to be around 2% in 2024/2025, FY23 GDP growth at 0.4%.

Fixed Income Outlook & Strategy

We are more positive on the bond market on the back of lower inflation, peaking interest rates, and low foreign ownership in government bonds. With low inflation and strong Rupiah, we think that the short end series would follow the rally should there be any indications that Bank Indonesia plans to cut rates. Our channel check also indicated that foreign investors have been showing more interests into Indonesia government bonds compared to other EMs such as China which may indicate further potential foreign inflow into IndoGB.

Indonesia government bond has been gaining support from strong domestic factors such as lower inflation, strong Rupiah, and twin surplus position in both fiscal and current account. Moreover, the low foreign ownership of 15% is still lagging to peer average at 25% or pre-covid level at 40%. Additionally, situation in the US seems to call for pivoting monetary policy and more stimulus which likely be supportive to the bond market. Due to the ongoing banking crisis, liquidity coming out from the regional US banks seems to also flow into US Treasury and bond market. Thus, we think that with equity turning volatile, the fixed income market may be the place investors turn to in the next few months.

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