Global markets fell as coronavirus economic fallout is worse than expected
The IMF stated the coronavirus pandemic has created an economic crisis thatis much worse than the 2008 global financial crisis as world economy comes to a standstill and over 90 countries so far have applied for financial assistance.This is evident from US job data which were all worse than expected as jobless claims surged to 6.6m (after 3.3m last week), non-farm payrolls fell by 701k,and US unemployment rate climbed to 4.4% (its highest level since 2017) after achieving a record low of 3.5% in the prior month. Grim economic outlook and deepening worries about the severity and duration of the pandemic have led to falls in global stock markets this week, after their stimulus-driven upswings last week. However, oil prices rebounded as news emerged that Saudi Arabia
and Russia are renewing talks on oil production cuts to end their price war.
JCI was up by 1.71% this week as the government announced its regulation in lieu of law that provides a legal basis for its fiscal stimulus of Rp405Tn (2.5% of GDP) through issuance of Recovery Bonds and Bank Indonesia's participation as a creditor to the government in the bond primary market. The stimulus was needed to prevent recession. The World Bank's baseline GDP growth forecast of 2.1% for Indonesia assumes activities to normalise by June but growth will be lower if mobility restrictions continues into the third quarter.
The Week Ahead - FOMC Minutes, US Jobless Claims, US Inflation Rate
The key economic calendar to watch out next week are Indonesia Consumer Confidence (Mon 10:00), Germany Industrial Production (Tue 13:00), FOMC Minutes (Thu 01:00), US Initial Jobless Claims (Thu 19:30), US Inflation Rate (Fri 19:30). Meanwhile, this week's economic data shows Manufacturing PMI recovered in China and weakened only slightly in US (better than expected).
Equity outlook globally will continue to be clouded with high uncertainty and volatility as coronavirus infection continues rising and containment measures disrupt economic activities. Indonesia's coronavirus outbreak is still at an early stage and thus its economic disruption potential is still unknown although we believe this risk is already partially priced in as JCI valuation has fallen to 12x trailing P/E (vs. 20-yr mean of 13.7x; 10-yr mean of 16.3x). While JCI had fallen to as low as 8x P/E during 2008 global financial crisis, we view current market valuation is attractive even if GDP and earnings growth falter this year due to coronavirus fallout. However, we believe sustained market recovery will need a flattening of the coronavirus infections curve and a resumption of economic
activities in Indonesia.
We have been recommending investors to stay defensive since last year with our broad-based ETFs RLQ45 and
Sumber : IPS RESEARCH
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