Stock Playing Stock Next Week, Beware of Bond Trends

Jakarta, CNBC Indonesia – The domestic financial market has successfully recorded a positive performance this week. The Composite Stock Price Index (JCI) rose 4.35% and closed at 7,182.96. JCI is moving closer to the psychological level of 7,200.

At the same time, the government bond market also showed a positive performance. SBN prices are observed to rise as reflected in the decline in yields (yield). Yield The benchmark 10-year SBN series fell 14.5 basis points (bps) to below 7% after last week at 7.14%.

The flood of foreign funds flowing into the stock market which reached Rp 6.97 trillion also made the rupiah exchange rate appreciate against the US dollar. In the market spot, the rupiah closed at Rp 14,435/US$ or strengthened 0.96% in a week.

Domestically, various economic data releases still show that the recovery is continuing.

The Indonesian Manufacturing PMI Index for May 2022 is still in the expansion zone. Indonesia’s manufacturing PMI in May 2022 was recorded at the level of 50.8. Even though Indonesia’s manufacturing PMI fell from the position in April 2022 which was at 51.9, factory activity still recorded expansion.

Then Indonesia’s inflation last month also rose 0.4% month on month (mom) and 3.55% annually (year on year/yoy). Indonesia’s inflation last month too in-line with the consensus of economists compiled by CNBC Indonesia.

Core inflation also rose at a pace of 2.58% yoy last month. The increase in core inflation is a reflection that people’s purchasing power is starting to show improvement. However, the core inflation rate is still within the target range of Bank Indonesia (BI) of 2-4%.

One month after the Eid 1443 H holiday, Covid-19 cases in Indonesia are consistently below 500 per day.

All of the indicators above are concrete evidence that the Indonesian economy continues to recover.

Sentiment that will move financial markets next week is still dominated by external factors, particularly related to the tightening of monetary policy.

The US central bank The Fed will hold a policy-making committee (FOMC) meeting to determine the benchmark interest rate on June 14-15, 2022.

Referring to CME Group’s FedWatch tool data, market participants projected the Fed to raise its benchmark interest rate again by 50 basis points (bps) in June to a target range of 1.25-1.50%.

Ahead of the Fed meeting, the US stock market experienced a correction this week. On a weekly basis, the performance of the benchmark US stock index fell by 1% on average.

At the same time, yield US government bonds that became the reference, namely the 10-year tenor also moved up and returned to close to 3%.

Train yield US government bonds, which are approaching the psychological level of 3%, should be watched out for because they could trigger a sell-off in domestic financial assets, both stocks and bonds, which could trigger corrections, especially when they have gone up fast.

CNBC INDONESIA RESEARCH TEAM

[Gambas:Video CNBC]