Indonesia Bourse May Extend Wednesday's Losses

The Jakarta Composite Index edged down 0.11% to 7,222.46, ending a three-day rally, pressured by losses in cement and telecom sectors despite mixed performance in financials and resource stocks. Weaker global cues and profit-taking are expected to further weigh on the overbought Asian markets, mirroring a late downturn on Wall Street where the Dow, NASDAQ and S&P 500 all closed in the red despite earlier gains spurred by softer-than-expected U.S. inflation data and progress in U.S.-China trade talks; crude oil surged over 5% amid these developments.

Analysis

The Jakarta Composite Index (JCI) concluded its three-day advance, during which it had accrued gains of nearly 190 points or 2.7%, by closing at 7,222.46, a marginal decline of 0.11% or 8.29 points. The index traded within a range of 7,172.20 to 7,239.96, with the slight downturn attributed to losses in cement companies, such as Semen Indonesia which fell 1.39%, and telecom stocks, exemplified by Indosat Ooredoo Hutchison's 0.47% drop. Financials and resource stocks presented a mixed performance; Bank Rakyat Indonesia experienced a 1.93% slump and Timah plummeted 4.86%, whereas Indofood Sukses Makmur rallied 3.66%, Energi Mega Persada surged 6.96%, and Bumi Resources jumped 8.20%. The broader market sentiment is mildly negative, with a sentiment score of -0.25 and a cautious tone, indicating expectations of further profit-taking in overbought Asian markets. This outlook is reinforced by a subdued performance from U.S. markets, where the Dow Jones Industrial Average finished almost unchanged, while the NASDAQ Composite and S&P 500 declined by 0.50% and 0.27% respectively, retracting from earlier intraday highs spurred by softer-than-expected U.S. May inflation data and an agreement in principle on a U.S.-China trade framework. In contrast, crude oil prices saw a significant upswing, with West Texas Intermediate for July delivery increasing by 5.11% to $68.30 per barrel, influenced by the U.S.-China trade discussions and renewed U.S-Iran tensions. The market impact score of 0.55 suggests these events hold moderate sway over market dynamics.

Key Decisions for Investors

• Investors should anticipate potential continued downward pressure on the JCI due to profit-taking pressures and weaker global market signals, particularly monitoring the 7,220-point support level.
• Given the divergent performance across sectors, a selective investment approach is prudent, focusing on companies with strong fundamentals that demonstrated resilience or significant gains, such as specific resource stocks like Energi Mega Persada and Bumi Resources.
• Maintain vigilance on external macroeconomic catalysts, including developments in U.S.-China trade relations, U.S. inflation reports, and geopolitical factors affecting crude oil prices, as these elements are likely to drive market volatility and influence investment outlooks.