Highlight Monthly Commentary - February 2021

Macroeconomics

Indonesia reported its 4Q20 GDP growth of -2.2% YoY and FY2020 GDP growth of -2.1% YoY with consumption and investment driving the contraction. 4Q20 current account was at a surplus 0.3% of GDP hence bringing FY2020 to a CAD of 0.46% of GDP as imports dip outweigh exports contraction. February inflation was booked at 1.38% YoY where on a monthly inflation was booked at 0.10% MoM driven by food and transportation inflations. January trade balance remained positive at USD2.0bn driven by positive export growth as a result of stronger CPO and coal prices. Budget deficit reached 0.26% of GDP as of January. Forex reserve rose to USD138bn in January while Bank Indonesia cut its policy rate by 25bps to 3.50% during the month.

Equity

JCI index rebounded in February with a positive return of 6.5% MoM. Foreign investors continued posting inflow of USD257mn in February. Investors bottom fished at the start of the month after the market downturn in the second half of January. Global investors were also more upbeat on the vaccination progress and declining COVID-19 infection. Towards the end of the month, the Omnibus Law’s 49 implementation laws were also signed. BI policy rate cut and macroprudential loosening boosted investors’ sentiments during the month as well.

Global equity market reported positive returns in February. The progress of vaccination around the world continues to give support to the market while the US’s USD1.9tn fiscal stimulus also alleviate investors’ mood. However, most markets turned volatile in the second half of the month following the rising concern of global reflation and rising US Treasury Yield. In Asia, China is seeing lower manufacturing PMI following the holiday season. Meanwhile in Europe, positive developments the Brexit talks gave support to the UK market and the GBP.  

Fixed Income

Fixed Income return was negative in February as the 10-year government bond yield rose from 6.20% to 6.58%. The bond market posted foreign outflow of USD713mn in February. Investors continued to assess the implications of rising US Treasury yield while weak 2020 GDP growth and higher fiscal stimulus for PEN caused concerns among investors domestically. Slowing auction demand in the second half of the month also pushed up yield with foreign investors starting to post outflows. Meanwhile, the US Treasury yield rose to 1.42% while the INDON31 yield closed at 2.59%.

Disclaimer

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