Daily Commentary (6-Aug): Positive Asset Class in First Week of August

The JCI fell very slightly by 0.03% to 6,203.4 (+2.2% MTD or +3.8% YTD), following 4 straight days of gains on Friday. There was net foreign outflow of Rp127.5bn (still net inflow of Rp1.2tn MTD or +Rp18.9tn YTD). Meanwhile, Asian stock markets closed mixed, with the Nikkei index up 0.3% to 27,820 (+1.4% YTD) and the Hang Seng index slid 0.1% to 26,179.4 (-3.9% YTD) ahead of the awaited US monthly jobs report. The rupiah depreciated slightly by 0.1% to Rp14,353/USD (still appreciated by 0.8% MTD or depreciated by 2.2% YTD).

INDOGB yields went up slightly on Friday, with foreign still reporting a net sell of Rp0.8tn, according to the CTP PLTE data on Friday. According to Bloomberg, the 5-yr FR86 benchmark series was trading at 101.59 (-0.06%) or yielded 5.11% (+1.4 bps), the 10-yr FR87 at 101.58 (-0.16%) or yielded 6.28% (+2.2 bps), the 15-yr FR88 at 99.62 (-0.03%) or yielded 6.29% (+0.3 bps), and the 20-yr FR83 at 105.13 (-0.04%) or yielded 7.0% (+0.9 bps). Regarding the 10-yr RoI USD global bond that will mature in Mar-2031, its price fell to 97.47 (-0.34%), yielding 2.14% (+3.9 bps), and the 5-yr CDS fell slightly to 77.91 (-2.23 bps). The 10-yr UST yields increased by 7 bps to 1.3% after the strong employment data released. The US economy added 943k jobs in Jul-2021, the largest increase in 7 months and above market expectations of 870k. The US unemployment rate also fell to 5.4% in July, significantly below the 5.7% expected. YoY, the average hourly earnings increased by 4%, above the market expectations of 3.8%.

In the latest DMO bond flow data as of 5-Aug (reflecting trading on 3-Aug, when conventional bond auction happened), foreign ownership in government bonds continued going up by Rp7.9tn to Rp976.41tn (net inflow of Rp10.6tn MTD or +Rp2.5tn YTD). YTD, the biggest net buyer of government bonds (incl. sukuk) is onshore banks at Rp129.3tn, followed by Bank Indonesia (BI) at Rp118.1tn, insurance & pension fund at Rp85.2tn, retail investors at Rp67.2tn, and others at Rp72tn.

Based on the DMO bond flow data as of 5-Aug, the biggest net buyer in the conventional bond auction on 3-Aug was still onshore banks at Rp19.6tn, followed by foreign investors at Rp6.9tn—the biggest foreign buying so far this year. Meanwhile, BI and institutional non-banks did net buys of only Rp3.5tn and Rp3.9tn, respectively. Thus, BI has already bought government bonds in the primary market (including sukuk) totaling Rp130.6tn YTD or only 20.2% of total issuances through auction and bought Rp5.7tn in the secondary market.

Therefore, on a weekly basis, the JCI rose by 2.2% (vs. -0.5% the previous week). The 10-yr rupiah government bond yield continued to fall slightly by 0.1 bps (vs. -1 bps the previous week), while the USD-denominated bond yield also fell slightly by 0.1 bps (vs. +2.8 bps the previous week). The rupiah also continued to go up by 0.8% against the USD (vs. +0.2% the previous week).

Based on the price monitoring survey in the first week of August, BI estimates a slight inflation of only 0.04% MoM in Aug-2021 or +1.6% YoY and 0.85% YTD (vs. -0.05% MoM and +1.17% YoY or +0.93% YTD in Aug-2020). The small increase in August’s inflation was due to increasing chicken eggs and chicken meat prices, each by +0.03% MoM. On the other hand, some commodities experienced deflations, such as tomatoes (-0.02% MoM), cooking oil (-0.02% MoM), and shallot (-0.01% MoM).

(Source: Mandiri Sekuritas)