Highlight Monthly Commentary - March 2022

Macroeconomics

Indonesia February CPI recorded a slight deflation of -0.02%MoM bringing annual inflation to 2.06%YoY. Indonesia 2M22 government budget recorded a surplus of Rp19.7tn vs a surplus of Rp28.9tn in Jan22. February trade surplus recorded at USD3.82bn vs a surplus of USD2.5bn in January. BI kept the rate unchanged at 3.5% and raised the reserve ratio requirement (RRR) by 150bps to 5%.

Equity

JCI increased by 2.7%MoM with around Rp 8.4tn net foreign buy in all market. JCI received a hefty inflow and reached its all times high at 7,099. Foreign appetite remained strong for Indonesian equity as the economy to benefit from higher commodity price, structural changes (more down streaming export) as well as improving covid condition. IDXEnergy (+11.9%) was the best performer thanks to high energy price and higher demand as some European countries were open to consume more coal to reduce their reliance to Russian gas. The second-best performer was IDXIndustrial (+6.8%) that might receive a trickle-down effect from elevated commodity price. IDXTech (+6.8%) rebounded on positive sentiment of GoTo IPO. The worst performer was IDXInfra (-2.7%) as telco and tower companies were corrected.

Majority of the global indices gained as the risk of central bank tightening and geopolitical tension were on the surface already. The western markets were cautious on the inflation but strong job and economy data lifted investor sentiment. Singapore index outperformed its peers on news of easing covid restriction and pushed travel related names higher. The China equity market was experiencing a lot of headwind from softer growth outlook due to mobility restriction and potential delisting in US market.

We remain positive on equities as valuation compared to peer equity markets remains attractive while the fundamental reform story remains intact. We are cautious in the short term due to risk form the Ukraine-Russia tension. 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 rose 22bps to 6.74% compared to the previous month. In comparison, the US 10-year treasury note increased by 51.2bps to 2.34%. The fed increased its policy rate by 25bps and signalled 6 more hike for the rest of the year (an increase in every 6 meetings for the rest of month in 2022). Fed Chairman Jerome Powell mentioned that the Fed could be more aggressive to control inflation. Based on DMO bond flow data as of 30 March, foreign ownership in bond accounted for 17.7% of total outstanding. The foreign investors posted an outflow of Rp40.6tn YTD. Indonesia 10 years USD global bond yield at 3.08%. IDR was flat at 14,369.

Higher  inflation and rising interest rates would  pressure the bond market. Monetary policy reversal and hefty  valuation would limit upside to the bond  market at this juncture.

Disclaimer

INVESTMENT IN MUTUAL FUND CONTAIN RISKS, PRIOR TO INVESTING IN MUTUAL FUND, INVESTOR MUST READ AND UNDERSTAND THE FUND PROSPECTUS. PAST PERFORMANCE DOES NOT INDICATE FUTURE PERFORMANCE.

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