The JCI November 6, 2020

𝐍𝐨𝐯𝐞𝐦𝐛𝐞𝐫 𝟔, 𝟐𝟎𝟐𝟎

* 𝐓𝐡𝐞 𝐉𝐂𝐈 𝐭𝐫𝐚𝐝𝐢𝐧𝐠 𝐫𝐚𝐧𝐠𝐞: 𝟓,𝟐𝟎𝟎𝐩𝐭 – 𝟓,𝟑𝟕𝟓𝐩𝐭  (𝐘𝐞𝐬𝐭𝐞𝐫𝐝𝐚𝐲 𝐜𝐥𝐨𝐬𝐞:  𝟓,𝟐𝟔𝟎𝐩𝐭)

* 𝐖𝐚𝐥𝐥 𝐒𝐭𝐫𝐞𝐞𝐭 𝐞𝐧𝐝𝐞𝐝 𝐡𝐢𝐠𝐡𝐞𝐫 𝐛𝐲 𝐬𝐨𝐦𝐞 𝟐% 𝐨𝐧 𝐬𝐦𝐨𝐨𝐭𝐡 𝐩𝐫𝐨𝐜𝐞𝐞𝐝𝐢𝐧𝐠 𝐨𝐟 𝐭𝐡𝐞 𝐔𝐧𝐢𝐭𝐞𝐝 𝐒𝐭𝐚𝐭𝐞𝐬 (𝐔𝐒) 𝐩𝐫𝐞𝐬𝐢𝐝𝐞𝐧𝐭𝐢𝐚𝐥 𝐞𝐥𝐞𝐜𝐭𝐢𝐨𝐧

* 𝐓𝐡𝐞 𝐉𝐂𝐈 𝐢𝐬 𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐭𝐨 𝐟𝐥𝐮𝐜𝐭𝐮𝐚𝐭𝐞 𝐚𝐧𝐝 𝐛𝐞 𝐬𝐮𝐩𝐩𝐨𝐫𝐭𝐞𝐝 𝐛𝐲 𝐬𝐭𝐚𝐛𝐥𝐞 𝐔𝐒𝐃𝐈𝐃𝐑 𝐚𝐧𝐝 𝐨𝐢𝐥 𝐜𝐥𝐨𝐬𝐞

Morning,

The Jakarta Composite Index (JCI) today (11/6) is expected to be in the range of 5,200pt – 5,375pt, be fluctuated and supported by sound financial and bank system.   The JCI jumped by 3.0% to close at 5.260pt yesterday (11/5), with foreign funds recorded a net buy of IDR711bn, the highest in the last 12 (twelve) weeks.  We relate the JCI hike to the elimination of one major uncertainty of an unsmooth process of the US presidential election, as many had expected.  In addition, rival of Democratic nominee Joe Biden, by major vote, is expected to solidly win the race, also added to the positive mood.  Joe Biden is seen as the more-investor friendly as compared to the incumbent Trump.  The the trade war strategy with China declared in 1Q18 was perceived not only created a confusion in the financial market, but also as pushing investments and jobs outside the US and hurting the country’s export.  At the other end, that the Federal Reserve does not increase the reference rate on its November 5 FOMC meeting  is also favorable for the domestic stock market.

Meanwhile, yesterday  (11/5) the DJIA closed higher  by  543 points or 2.0% to 28,390pt, while the  S&P500 and the Nasdaq ended higher by  2.0% and 2.6%, respectively.

𝐈𝐧𝐝𝐨𝐧𝐞𝐬𝐢𝐚 𝟑𝐐𝟐𝟎 𝐆𝐃𝐏 𝐠𝐫𝐨𝐰𝐭𝐡 𝐫𝐚𝐭𝐞 𝐚𝐭 – 𝟑.𝟒𝟗% 𝐘𝐨𝐘 (𝟐𝐐𝟐𝟎: -𝟓.𝟑𝟐% 𝐘𝐨𝐘, 𝟏𝐐𝟐𝟎: +𝟐.𝟗𝟕% 𝐘𝐨𝐘)

The 3Q20 GDP contraction, at 3.49% YoY  is higher than market consensus of  a contraction at the rate of close to 3% YoY.  Nevertheless, on QoQ basis, Indonesia economy in the 3Q20 improved meaningfully as compared to that of in 2Q20, thanks to the relaxing of the large-scale social distancing (PSBB) since June 14.

In the 3Q20, the GDP improved by +5.05% as compared to the previous quarter (2Q20: -4.19% QoQ). Nevertheless, on cumulative basis, this year during Januay to September 2020, the economy grew at the rate of -2.03% YoY, or lower as compared to the position in June 2020 at a contraction of 1.26% YoY. This means that the domestic economy improvement in the 3Q20 alone is not sufficient to push growth rate to the 0% level or higher for the total cumulated  3Qs this year.

At the other end, Finance Minister Sri Mulyani has been quoted at end of September to estimate that Indonesia GDP growth this year is at the range of -1.7% YoY to +0.6% YoY.   The latest GDP figure will provide a more clear assumptions for the full year GDP growth estimate this and next year. Should full year GDP growth be within 0% growth this year, that should support the stock market, in our note.

𝐒𝐞𝐯𝐞𝐫𝐚𝐥 𝐬𝐞𝐜𝐭𝐨𝐫𝐬 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐞𝐝 𝐥𝐨𝐰𝐞𝐫 𝐢𝐧 𝟑𝐐𝟐𝟎 𝐯𝐬. 𝟐𝐐𝟐𝟎

In the 3Q20, Mining and excavation sector grew at the rate of -4.28% YoY (2Q20: -2.72% YoY), Financial and insurance sector grew at  -0.95% YoY  in 3Q20  (2Q20: +1.05% YoY), while Real Estate sector at +1.98% YoY (2Q20: +2.3% YoY). These 3 (three) sectors were main driver of the underperformance of the economy during the 3Q20, in our note.

At the other end, yesterday (11/5) the WTI price closed lower  by 0.9% at USD38.9/barrel on resume worry of demand, also on the fact that Italy posted highest daily rate of new infection of COVID-19 cases. Meanwhile, yesterday the USDIDR  closed  at IDR14.439  vs. IDR14.557 the previous one.

We advise the following recommendations, for both trading and longer-time investment purpose. 𝐀𝐀𝐋𝐈, 𝐋𝐒𝐈𝐏 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘈𝘨𝘳𝘪, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘜𝘯𝘥𝘦𝘳𝘸𝘦𝘪𝘨𝘩𝘵 ), 𝐔𝐍𝐓𝐑, 𝐈𝐓𝐌𝐆, 𝐀𝐃𝐑𝐎, 𝐏𝐓𝐁𝐀 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘊𝘰𝘢𝘭 𝘔𝘪𝘯𝘪𝘯𝘨, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘔𝘢𝘳𝘬𝘦𝘵-𝘸𝘦𝘪𝘨𝘩𝘵), 𝐆𝐆𝐑𝐌, 𝐔𝐍𝐕𝐑, 𝐈𝐂𝐁𝐏 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘊𝘰𝘯𝘴𝘶𝘮𝘦𝘳, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘖𝘷𝘦𝘳𝘸𝘦𝘪𝘨𝘩𝘵 ), 𝐀𝐒𝐈𝐈 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘈𝘶𝘵𝘰𝘮𝘢𝘵𝘪𝘷𝘦, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘔𝘢𝘳𝘬𝘦𝘵-𝘸𝘦𝘪𝘨𝘩𝘵), 𝐚𝐧𝐝 𝐀𝐂𝐄𝐒, 𝐒𝐂𝐌𝐀, 𝐌𝐀𝐏𝐈 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘛𝘳𝘢𝘥𝘦, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘖𝘷𝘦𝘳𝘸𝘦𝘪𝘨𝘩𝘵),𝐚𝐧𝐝 𝐓𝐊𝐈𝐌 (𝐬𝐞𝐜𝐭𝐨𝐫 𝐨𝐟 𝘉𝘢𝘴𝘪𝘤 𝘐𝘯𝘥𝘶𝘴𝘵𝘳𝘺, 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧 𝐬𝐮𝐠𝐠𝐞𝐬𝐭𝐢𝐨𝐧 𝘔𝘢𝘳𝘬𝘦𝘵-𝘸𝘦𝘪𝘨𝘩𝘵).

Cheers,