Premier Fund Monitor - The Week Ahead : Volatility returns amidst tech sell-off, US-China tensions, vaccine trial pause, a stall in job data
Monday, September 14, 2020       18:28 WIB

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Tech sell-off continued amid rising US-China tensions, vaccine trial pause
US stocks fell further from record highs as tech sell-off continued into second week amid negative sentiment from rising US-China tensions, a lack of progress in Congress on new fiscal stimulus, vaccine trial pause and a stall in the decline of jobless claims. The tech sector is sensitive to rising US-China tensions as US government considers blacklisting China's semiconductor manufacturer SMIC . Meanwhile, European markets rebounded on better industrial production data despite no announcement of a new stimulus from ECB and renewed fears of a hard Brexit. AstraZeneca announced a pause of its Covid vaccine trials due to unexplained illness in one of the trials earlier in the week although by weekend the company stated it will resume the trials. US initial jobless claims of 884k was unchanged from prior week, thus defying consensus expectation for a decline. On a more positive note, US core inflation picked up to 1.7% YoY in August vs. consensus expectation of 1.6%
In Indonesia, the JCI fell sharply by 4.26% this week as the Governor of Jakarta announced a plan to reimpose large-scale mobility restrictions to stem rising Covid new infections as foreign investors continued exiting the stock market (net outflow of Rp4.5Tn). Key cyclical stocks in banking, auto, cement, property, construction, and toll road sectors were among the hardest hit by the sell-offs while the more defensive consumer and telecom sectors and also mining stocks were the least impacted by the market sell-offs
The Week Ahead - Indonesia Trade Balance, BI Meeting, Fed Rate Decision
The key economic calendar to watch out next week are EU Industrial Production (Mon 16:00), China Retail Sales & Industrial Production (Tue 09.00), Indonesia Trade Balance (Tue 11:00), US Industrial Production (Tue 20:15), US Retail Sales (Wed 19:30), Fed Interest Rate Decision and FOMC Economic Projections (Thu 01:00), Indonesia 2W / 4W Automotive Sales (Thu 10:30/16:30), BI Interest Rate Decision (Thu 14:30), US Initial Jobless Claims & Housing Starts (Thu 19:30)
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 a second wave of infections. We believe Indonesia's coronavirus fallout is already fully priced in as JCI P/E valuation has fallen to just above 20-yr average, while global markets valuation have returned to near pre-pandemic highs at 1SD above long-term averages. We view Indonesia's market valuation as attractive, regardless of GDP and earnings growth in 2020. Given high correlation factor of 0.80 between JCI and S&P500 indices in 2020 (vs. 0.19 in 2018-2019), we expect JCI will continue to recover, driven by global catalysts such as vaccine discovery. However, given last week's decision to reimpose mobility restrictions in Greater Jakarta region, which will have a negative impact on economic growth and equity earnings, we return to our base-case 2020 JCI target of 5,300 (bullish case target is 5,600)
Recommendation
We have been recommending investors to stay defensive since last year with our broad-based ETFs RLQ45 & to minimize volatility and our satellite ETFs (Sri Kehati) and (Pefindo I-Grade), both of which have overweight positions in , which is considered as a defensive stock at times of market uncertainty. For investors looking to benefit from a further 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 a 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 more risky at current market conditions. However, these two ETFs also have lowest valuation among of our ETF universe, with 2020F P/E of 17.0x and 16.4x, respectively, which are lower than valuation of our broad-based ETFs RLQ45 (at 18.7x), (at 18.9x), and (at 19.1x), and thus may have more upside potential if Indonesia's stock market recovers on a sustainable basis. Please refer to our ETF Fund Guide in page 2

Sumber : Indo Premier Investment
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