The JCI dropped by 22.1% to 4,905 in 1H20. We looked at various stocks in JCI that have contributed the most to the decline and have seen selling pressure.
Statistics Indonesia (BPS) recorded low inflation in Jun-20. The biggest contributor of inflation came from food, beverage and tobacco basket. On inflation components, chicken contributed the most as it brought 0.14% to total inflation.
BI believes that the economic growth will go up eventually. Thus, in 2021, BI predicts the recovery phase is near and the growth in 2021 will be around 5-6%.
Looking at the smaller trade deficit compared to 2018 and 2019 and the relaxation of PSBB, the trade performance will be getting better when other countries as our key trade peers recover from Covid-19.
We expect JCI to encounter another selling pressure in 3Q20, as the real extent of economic and corporate earnings impacts of Covid-19 become manifest with the release of 2Q20 earnings and GDP figure starting in July 2020.
In a bid to revive the stuttering economy, Indonesian officials have planned to economic reopening in stages starting from June with some health protocols remaining in place.
As Covid-19 pandemic hits on every sector, it brought significant impact to financial account it swung to a deficit of USD2.93 bn due to the capital flight amid pandemic compared to surplus of USD9.86 bn in 1Q19.
Trade performance in 2018 and 2019 were way worse than Jan-Apr 2020 performance. This could be a signal of 2020 weaker global demand of Indonesia’s export, supported by the lower inflation of OECD member states with lower trend ahead.
Low inflation in Apr-20 is unusual since it historically used to be higher compared to March.
Our economist now expects a U-recovery for the Indonesia economy as our baseline scenario instead of V-recovery. With cases of Covid-19 are on the rise we believe it would peak in June and be brought under control by third quarter of this year.