Indonesia again led losses among Asian stock markets on Friday (04/05). The benchmark Jakarta Composite Index fell 1.13 percent to close at 5,792.35 points, its lowest position since August 2017. Most stocks in the Asia-Pacific region were in the red zone today as investors lack risk appetite ahead of the release of US payrolls data (due later today). Analysts expect to see a strong figure. Meanwhile, US unemployment is also expected to have eased slightly.
Improving US jobs data would be yet more signs that the US economy is strengthening robustly, thus reducing the need for a (prolonged) helping hand from the US Federal Reserve (despite the fact that the Federal Reserve was actually quite dovish after the May policy meeting - concluded earlier this week - when it indicated that US inflation would be allowed to exceed the 2 percent target, slightly, without causing an immediate need for more aggressive monetary tightening).
Besides US economic data (and its possible impact on US monetary policy), markets are also focusing on the trade talks that are going on between the USA and China. US Treasury Secretary Steven Mnuchin arrived in China for talks that should lead to easing trade tensions. However, analysts argue that possibilities of seeing any breakthroughs (regarding the tariff standoff) are slim as both nations are eager to lead the race in strategic (advanced) technologies.
Despite the external factors, we believe there is an internal factor at play too that is giving downward pressure on Indonesian stocks. At the start of next week, Indonesia's Statistics Agency (BPS) is scheduled to release Indonesia's official Q1-2018 GDP data. However, the continuation of subdued household consumption in Southeast Asia's biggest economy is expected to cause a disappointing figure. Household consumption accounts for about 56 percent of the nation's total economic growth.
Although recovering 1.5 percent year-on-year (y/y) in the following month, Indonesian retail sales contracted 1.8 percent (y/y) in January 2018. The March figure has not been released yet but, overall, it is likely that Indonesia's Q1-2018 retail sales growth will be rather flat. Secondly, lower-than-predicted inflation in Indonesia is regarded a sign of weak consumer demand. Thirdly, several giant consumer goods companies, including Unilever Indonesia, have released disappointing Q1-2018 corporate earnings reports.
Meanwhile, the US dollar was affected by some profit-taking after having experienced a strong week. Moreover, the Federal Reserve turned out to be less-hawkish-than-estimated at its May policy meeting thus somewhat reducing US dollar demand. Still, the Indonesian rupiah depreciated slightly against the greenback. Based on the Bloomberg Dollar Index the rupiah weakened 0.04 percent to IDR 13,945 per US dollar on Friday (04/05).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia