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Premier Fund Monitor : The Week Ahead - Hot inflation ends US stocks winning streak, shaking consumer confidence, sending yields higher
Monday, November 15, 2021       09:48 WIB

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US inflation worries shaking market sentiment and consumer confidence
US stocks ended five consecutive weeks of gains, retreated from record highs, after October inflation jumped 0.9% MoM (+6.2% YoY), well above consensus expectations (0.6%), marking the fifth month in a row US annual inflation rate topping 5.0%. Core CPI inflation rose 0.6% MoM (+4.6% YoY), also exceeding consensus forecasts (0.4%), although PPI inflation of 0.6% came as expected. With inflation fears returning to markets after easing recently, 10-yr UST yields climbed back to 1.57% (+11bps) while stocks shrugged off the weekly jobless claims data, which fell to a new pandemic-era low of 267,000. Consumers are also worried about runaway inflation as indicated by University of Michigan's consumer sentiment index which fell further to 66.8 - this is the lowest level in a decade and it was even lower than at the start of the pandemic in April 2020. Consumers' inflation expectations for the year ahead also edged up to 4.9% (from 4.8%). Elsewhere in Europe, stock markets generally ended up higher on growth optimism and dovish comments from ECB, which decided to keep its rate and monetary policy stance unchanged despite rising inflation pressures. Emerging Markets equities performed well, outperforming Developed Markets peers this week (+1.69% vs. -0.26%), driven by stock market recoveries in Brazil and China, which are two of the worst performing EM stock markets this year.
In Indonesia, JCI gained 1.05% this week as the pace of foreign equity inflows picked up again to Rp1.94Tn, after slowing in recent weeks. Meanwhile, bond market continued to suffer outflows ahead of Fed tapering this month although IDR bond yields have so far been very resilient due to strong domestic demand. The stock market's gains this week were also driven by small and medium cap stocks while among large cap stocks, gains in industrials (auto), basic materials, energy, banks and consumer sectors were offset by the declines in telecom, retailing, poultry and healthcare stocks.
 The Week Ahead  - Indonesia Trade Balance, BI Meeting, US Retail Sales
The key economic events and data releases to focus next week are Indonesia Trade Balance (Mon 11:00), US Retail Sales (Tue 20:30), US Industrial Production (Tue 21:15), ECB President Lagarde Speech (Tue 23:10), Bank Indonesia Interest Rate Decision (Thu 14:30), Indonesia Automotive Sales (Thu 17:00), US Initial Jobless Claims (Thu 20:30).
Investment Conclusion
Global equities have priced-in strong growth recovery in 2021 but the key issue for markets this year has shifted to inflation, as reflected in rising bond yields, as this could lead to monetary policy tightening in the advanced economies. An unexpected shift in Fed's monetary policy (eg. taper, rate hike) could unsettle global markets and lead to fund outflows from EMs. However, we view the risks to Indonesia are lower now than in 2013 as a Fed tapering is already expected, Indonesia's country risk indicators have improved, and its bond market is now more resilient. Our 2021 JCI target of 6,600 has been achieved but we believe there is scope for further upside (our 2022 JCI target is 7,400) given lagging performances of EM (including Indonesia) in comparison to DM equities.
We have recommended investors to stay defensive since before the pandemic, with our broad-based ETFs RLQ45, (IDX30), (Pefindo i-Grade), and ESG ETF (Sri Kehati) to minimize volatility. Both and have overweight positions in , widely considered as defensive stock at times of uncertainty. also has an overweight position in cyclical stocks, including in banking and basic materials sectors, and underweight of defensive stocks in the portfolio. As such, is exposed to sectors that should benefit the most from an economic recovery while still maintaining defensiveness through its overweight exposure in . We also like ETF ( MSCI Indonesia Large Cap) for its constituent of mainly blue-chip stocks, which should benefit the most from foreign equity inflows, as seen during the past four months.
Meanwhile, we view our narrow-based (thematic) ETFs such as (Consumer), (Rate Sensitive), (Infrastructure), and (State-Owned Companies) as better suited for trading or satellite investments given their more cyclical stock performances and importance of entry and exit timings for fund performances.

Sumber : IndoPremier Investment

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