Highlight Quarterly Market Commentary - 2Q 2022

Macroeconomics

1Q22 state budget recorded a surplus of Rp10.3tn and expanded to Rp132.2tn in May. Indonesia 1Q22 total investment increased 28.5% YoY. 1Q22 GDP booked at 5.01%YoY. 1Q22 BoP recorded a deficit of USD 1.8bn vs 4Q21 deficit of USD 0.8bn. April trade surplus recorded at all time high of USD7.56bn. BI kept the interest rate unchanged at 3.5%.

Equity

JCI declined 2.26% QoQ to 6,912 despite hefty net foreign buy of Rp29tn in the second quarter of the year. The index reached its all times high at 7,355 on April as market was supported by solid macro data. The index was corrected after the Hari Raya holiday due to global pressure. Investors took profit and waiting on the sidelines ahead of BI policy meeting and inflation data.  The best quarterly performer was IDXEnergy (+10.6%) as some European countries, Japan and South Korea utilities companies halted their coal purchases from Russia. The worst performer was IDXFinancial (-11.5%) due to profit taking on the conventional banks and deep correction on the digital banks.

Most of the global markets were corrected due to central bank tightening policy and geopolitical tension. Chinese market outperformed the peers on improving covid condition and reopening of its cities. IMF cut global growth forecast due to Russia’s invasion. Global central banks hiked rate to cool inflation.

We remain positive on equities as the fundamental reform and recovery story remains intact. However, we expect continuing volatility in the market following global recession fears on the back of higher inflationary environment and geopolitical situation. 

Fixed Income

Indonesia 10 years government bond yield jumped 48bps to 7.22% as it faced a pressure from the global situation whereby policy rate increased and yield was climbing. The US 10-year treasury note increased by 67.4bps to 3.013%. The Fed was committed to combat inflation using the policy rate. On the last meeting, The Fed increased the rate by 75bps to a range between 1.5-1.75% (highest hike since 1994). The Fed increased the inflation outlook to 5.2% from 4.3% earlier. Based on DMO bond flow data as of June 28, Foreign ownership recorded at 16.1% of the outstanding and outflow of Rp112.4tn YTD. Indonesia 10 years USD global bond yield at 4.48%. IDR depreciated by 3.87% to 14,898.

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

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.

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).