BRIDS Market Pulse

In the spotlight

• JCI continued its relief rally, up 2.8% w-w, in line with regional peers. Metal sectors (+14% w-w) outperformed, despite the ratification of new royalty scheme by the government (i.e., negative impact for earnings). Meanwhile, we also noted outperformance by the laggard sectors such as Cement (+12% ww), Telco (+10% w-w), Infra (+9% w-w), Coal, Property (+8% w-w), indicating that investors have started to search for value within the market. Meanwhile, Banks (+1.9% w-w, adjusted for dividend) and Consumer-related sectors (Consumers +4.5% and Retail +3%) performed more in line with the market. On the flows front, foreign investors remained net seller, but with a smaller outflow of US$107mn (in regular market) vs. YTD average of US$136mn.
• Global volatility continues to calm, with the VIX index falling to ~30 (though still above normal levels) amid more rhetoric of a possible deal on trade and tariffs between US, China and other countries. USD remains on the weak side (DXY continued to hover at 99-100), as the flight to safe-haven gold continued (+3% w-w), while other metals also benefited (copper +5% w-w, nickel +4% ww). The potential for further improvement in global sentiment will continue to hinge on news from the tariff front this week, but we see the USD to remain on the weak path.
• More data releases point toward slowing economic growth, with Mar25 retail sales falling to 0.5% yoy, marking the weakest growth recorded during a Ramadhan month (excluding 2020). The F&B category, typically a key driver during Ramadhan, rose by only 1.4%—well below the 10% average for Ramadhan seasons in previous years. We also noted drop in livebird price (to Rp15.8k/ kg) post Idul Fitri, indicating possible weak demand, while on the corporate front, ACES lowered its SSSG guidance to at least 1% yoy for FY25. With recent data pointing toward risk of slower economic growth, 1Q25 earnings may pose downside risk to our FY25 earnings forecast (currently at 4.5%).
• Chase the laggard or sell on strength? Our meetings with clients indicated more investors are comfortable maintaining current positioning, with view that 1Q25 earnings will still meet expectations. Nonetheless, most clients agree with our view that downside risk will be on 2Q25 earnings. More clients also question the sustainability of metals prices’ strength, given the risk of stagflation amid the tariff war. Sector exposures were mixed (OW in Banks, Consumers and Telco based on Mar25 KSEI data), but we sense that investors are still under-exposed in the laggard sectors (Property, Cement).

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