Macro Strategy: Repeats or Rhymes?

Stock Code	Last Price	Change	Change %
CUAN	11.600	1.650	16,58%
DSSA	52.325	1.625	3,21%
MKPI	24.725	725	3,02%
TPIA	9.650	500	5,46%
CTBN	4.880	380	8,44%
INKP	6.325	175	2,85%
BBCA	9.650	150	1,58%
BREN	6.650	150	2,31%

Macro Strategy

Repeats or Rhymes?

May is often linked to softer sentiment, but macro and policy factors likely outweigh seasonal effects on market performance.
Focus is now on FOMC meeting, with the Fed expected to hold rates amid tariff uncertainty. markets still expect more cuts than Fed.
Indonesia’s wider 3M25 fiscal deficit, weak April PMI, and soft consumption and investment likely dragged 1Q25 GDP to 4.92%.

Sell in May? We often associate May with softer market sentiment, prompting us to examine whether this pattern may repeat this year. We reviewed the average monthly performance of key asset classes and macro indicators over the past five years (2019–2024), excluding 2020 and 2021 for 4W and 2W sales due to pandemic-related distortions. Our analysis covered INDOGB and UST yields, the JCI index, the IDR, the DXY, and policy rate movements (BI Rate and Fed Funds Rate). On the demand side, we tracked the annual change in 4W, 2W, and cement sales volumes. The findings suggest seasonal trends play a role, especially toward investor behavior, but broader macro and policy factors are likely to have greater influence on market performance.

Based on our five-year sample, the JCI was the only asset among those reviewed that showed a consistent average decline in May. In contrast, both domestic and global bond yields tend to decline during the month, signaling bond prices uptrend. Interestingly, this strength in bonds occurred despite the usual pattern of foreign outflows in May, likely cushioned by increased allocations from domestic investors to safer assets. On the demand side, May has historically stood out as one of the stronger months in terms of annual growth for vehicle and cement sales.

When extending the analysis to a 10-year period (2015–2024), many indicators show no clear seasonal trend, resembling a coin toss in terms of frequency. INDOGB yields, the IDR, DXY, 4W sales, and foreign flows each recorded five positive and five negative outcomes in May. Meanwhile, UST yields and 2W sales showed a slight bias toward weakness, with six monthly declines and four gains. The JCI, however, stands out as the most consistently underperforming asset, posting declines in seven of the last ten Mays, including a four-year losing streak from 2021 to 2024. In our view, this trend has been partly driven by a sustained decline in domestic equity AUM, as investor preference shifted toward Fixed Income and Money Market instruments as shown in their respective higher AUM level.

The Fed vs Market Expectation. All attention is now firmly on this week’s FOMC meeting, where the Fed is widely expected to hold the Fed Funds Rate (FFR) steady. This pause reflects heightened uncertainty surrounding tariff developments, with policymakers likely adopting a wait-and-see approach as they seek greater clarity on inflation risks. The moderation in March’s pre-tariff inflation data further reinforces this cautious stance.

The Fed’s Beige Book highlights rising business uncertainty tied to tariffs, particularly regarding the ability to pass through increased costs. Companies may hesitate to adjust prices due to volatility in tariff levels and concerns over consumer price sensitivity. Meanwhile, the headline figure for 1Q25 US GDP showed a slight contraction of -0.3% y/y, though consumer spending still rose by 1.8% on a quarterly annualized basis. However, underlying signs of stress are emerging: delinquency rates on consumer loans and the proportion of borrowers making only minimum payments have both reached their highest levels in over 12 years. Reflecting these pressures, the Atlanta Fed’s GDPNow model recently downgraded its 2Q forecast, trimming personal consumption expectations from 3.3% to 1.9% and revising private fixed investment from 1.4% to -0.7%.

Still, near-term growth is not off the table, as higher-frequency data from the Dallas Fed suggests continued economic momentum. Altogether, this mixed outlook strengthens the case for the Fed to remain patient before making any adjustments to its policy trajectory. The latest dot plot would suggest 50 bps rate cut this year, while market expects up to 100 bps. Such differences often lead to potential volatility in the DXY, as reduced rate cut expectations on more hawkish Fed tend to support a rebound in the DXY, and vice versa.

Domestic Moderation Data Start to Emerge. On the fiscal front, the government has released further details for 3M25. State revenue reached IDR516.1tn, down 16.8% y-y, but still an improvement from the 20.8% decline recorded in Feb. Tax revenue was still down 18.1% y/y, though notably better than Feb’s 30.2% drop, partly due to the personal income tax reporting deadline. The Ministry of Finance also clarified that SOE dividends will now be redirected to Danantara, effectively excluding them from the state budget.

Government spending totaled IDR620.3tn, up 1.4% y-y, as fiscal efficiency spending starts to improve. Of the IDR306.7tn in budget efficiency, IDR86.6tn has been reallocated for newly created or restructured K/Ls (IDR33.1tn) and for existing ones (IDR53.5tn). An additional IDR100tn in potential savings from these efficiency efforts may be directed to support the MBG program, which aims to reach 82 million beneficiaries by Q425 and requires a total budget of IDR171tn in 2025. Despite these reallocations, subsidy targeting inefficiencies remain a concern as in 3M25: 23% of social assistance was received by the top 40% income group, 50% of energy subsidies benefited the richest 40%, while for solar subsidies, 79% reached that same high-income segment. Better targeting could have saved the government an estimated IDR22.7tn in 3M25 alone. The primary balance recorded a surplus of IDR17.5tn, while the overall fiscal deficit stood at IDR104.2tn or 0.4% of GDP, supported by IDR250tn in financing.

Aside from fiscal, Indonesia’s manufacturing sector emerged as the worst performer in Asia in April 2025, with declines in output and new orders. More critically, the business outlook fell below its long-term average, pointing to eroding confidence and potentially signaling a soft outlook in the real economy. Also we expect mundane 1Q25 GDP growth of 4.92% y-y, down from 5.03% in 4Q24, driven by: moderating household consumption at 4.80% y-y and contractions in government and non-profit spending post-election; as well as slower investment growth.

Capital Market: Still on The Uptrend. The 10-year UST yield rose 4 bps to 4.33%, while the 2-year climbed 9 bps to 3.83%. In contrast, Indonesia’s 10-year government bond yield fell 5 bps to 6.88% on solid net foreign inflow. Despite DXY edged up 0.17% over the week, the IDR strengthened 2.35% to IDR16,435, while Indonesia’s 5-year CDS held steady at 96 bps. JCI posted another 2% weekly gain, with index closed at 6815.7.

Fixed Income Flow: Data from the Ministry of Finance as of 30^th April (Thursday) reported a weekly net foreign inflow of IDR8.91tn into Government Securities (SBN), raising their total holdings to IDR900tn. MTD inflows reached IDR7.79tn. Within the domestic sector, banks saw a sharp weekly outflow of IDR31.86tn but still recorded net MTD inflow of IDR10.19tn. Bank Indonesia (excluding repo) registered a weekly inflow of IDR 38.65tn (MTD outflow of IDR1.76tn). Mutual funds posted a weekly net outflow of IDR 0.46tn, while insurance and pension funds added IDR4.55tn in inflows.
SRBI Flow: Foreign interest in SRBI remained steady, with a weekly net inflow of IDR0.59tn as total outstanding SRBI rose to IDR881.81tn. Despite this recent trend, YTD figures still show a cumulative net foreign outflow of IDR12.05tn, with foreign holdings now at IDR202.75tn, or about 23% of the total.
Equity Flow: The JCI rose 2% w-w to close at 6,815.7, although it remains down 3.7% YTD. During the fifth week of April (April 28 – May 2), foreign investors recorded a net inflow of IDR311bn, ending the straight three weekly outflow. Total foreign outflows reaching IDR7.5tn MTD and IDR34.5bn YTD. Companies with the most consistent foreign inflows included ANTM, TLKM, CPIN, BRIS, and TPIA. Meanwhile, BMRI, BBRI, BBNI, BBCA, and UNTR were among those seeing steady foreign outflows.

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