Download PDFGlobal markets gained in 2020 during pandemic on recovery optimism
Stocks climbed in most major markets this week as vaccine rollouts broadened,US stimulus signed, while EU agreed on a trade deal with UK and an investment treaty with China. 2020 turned out to be a solid year for major stock markets,despite pandemic, with emerging equities minimising losses on expectations of a recovery year in 2021. The best performing Asian stock markets in 2020 were South Korea, Taiwan, Japan, India, China, and Vietnam, while Southeast Asian markets mostly reported small losses for the year after their strong recoveries in the past few months. This optimism was despite record high hospitalisations,discovery of a new virus strain, slower than expected vaccine distribution in US,and renewed economic lockdowns and restrictions globally. A light economic calendar this week showed weaker US pending home sales in November (-2.6% MoM) but better weekly jobless claims of 787k (vs. 806k in prior week).
In Indonesia, JCI fell 0.49% despite small inflow Rp272Bn while foreign outflow in the bond market was larger at Rp1.9Tn this week. Cyclical stocks in property,basic industries, infrastructure and mining sectors led the market down. On the vaccine front, Indonesia secured supply of 100mn doses from AstraZeneca and Novavax, aside from 125mn doses from Sinovac, although these vacciness are still pending local regulatory approval.
The Week Ahead - US Congress meeting to certify Joe Biden's election win
The key economic calendar to watch out for next week include Indonesia Markit Manufacturing PMI (Mon 07:30), China Caixin Manufacturing PMI (Mon 08:45),Indonesia Inflation (Mon 11:00) & Retail Sales (Tue 10:00), China Caixin Services PMI (Wed 08:45), US Factory Orders (Wed 22:00), FOMC Minutes (Thu 02:00),EU Retail Sales (Thu 17:00), US Jobless Claims (Thu 20:30) & Non Farm Payrolls (Fri 20:30). On political front, US Congress' meeting on 6th January to certify Joe Biden's Electoral College win will face challenges from President Trump's allies,as a final attempt to overturn the US presidential election outcome.
Investment Conclusion
Equity markets globally have recovered strongly, pricing in V-shaped recoveries in economic growth and equity earnings in 2021, as the worst of the economic fallout from the pandemic seems largely over despite fears over new waves of infections. We believe Indonesia's coronavirus fallout is already fully priced in as JCI's forward P/E valuation has fallen to 20-yr average, while global markets valuation have returned to pre-pandemic highs of 1SD above long-term mean. We view Indonesia's market valuation as attractive and expect JCI to continue its recovery, driven by catalysts such as vaccine discovery, Omnibus Law and Indonesia's improving macro outlook. With a persistent bullish market outlook,we maintain our 2021 JCI target of 6,600, for now.
Recommendation
We have been recommending investors to stay defensive since last year with our broad-based ETFs RLQ45 & to minimize volatility and our ESG ETF (Sri Kehati) or (Pefindo i-Grade), which have overweight positions in ,which is considered as defensive stock at times of uncertainty. Please note that ESG (Environmental, Social & Governance) ETFs globally saw record inflows in 2020 amid the pandemic, after a strong rise in 2019. For investors looking to benefit from market rebound, our pick is ETF ( MSCI Indonesia Large Cap),whose constituents of 15 large cap stocks mostly owned by foreign investors are among most impacted by foreign selling and thus should benefit the most from recovery. shares similarity with and in terms of overweight in banking sector, including in .
Meanwhile, (SM-Infra18) and (SOEs) focused on SOEs in infrastructure and financial sectors, lacked defensive constituents such as and consumer stocks, and thus may be viewed as riskier during the pandemic. However, these two ETFs also have lowest valuation among of our ETF universe, with 2021F P/E of 15.5x and 15.1x, respectively, which are lower than valuation of our broadbased ETFs RLQ45 (at 17.3x), (at 17.1x), and (at 16.9x), and thus may continue to have more upside potential if Indonesia's stock market recovers on sustainable basis and investors continue to rotate away from defensive sectors into cyclical stocks on the back of vaccine distribution and expected economic recovery.
Sumber : IndoPremier Investment