Today’s Outlook:

• Global stock markets were green on Tuesday (21/01/25) and the dollar rallied after plummeting the day before, thanks to Donald Trump’s return to the White House bringing mixed messages about accelerating economic growth, imposing tariffs, and also about trade policy. The Canadian Dollar and Mexican Peso bore the brunt of market fluctuations after Trump said he was considering imposing 25% tariffs on neighboring countries as soon as February 1. In fact, the market is still digesting the series of executive orders released by Trump, but it gave investors some relief that Trump is still refraining from immediately announcing more comprehensive tariffs at the beginning of his second term as president, which triggered the decline in the 10-year US Treasury yield. The global MSCI index rose 0.7%, and US stocks mostly moved higher. The S&P 500 index appreciated 0.9%, the Nasdaq gained 0.6%, and the Dow Jones Industrial Average jumped 1.2%.

• MARKET SENTIMENT: A few hours after his inauguration, Trump immediately issued 42 executive orders (Presidential Decrees) and 115 personal actions, related to the legal sector, energy, health, and gender. Some that are considered controversial are as follows:

– leaving WHO because joining this world health organization is considered a burden on the US economy as 19% of WHO finances are supported by the US, and Trump considers WHO to fail to act independently of political influence.

– imposed a national emergency on the Mexican border, triggered by the large number of illegal immigrants from there; and designated criminal cartels as terrorists. Trump also plans to abolish birthright citizenship.

– granted clemency to about 1500 of his supporters who stormed the Capitol Building on January 6, 2021 in an attempt to besiege the US Parliament and prevent Biden’s confirmation as US President at that time.

– withdrew from the Paris Climate Agreement on the grounds that he wanted to prioritize the interests of the US & its people, then intends to massively explore oil & gas energy including lifting the ban on oil drilling in the Arctic, in line with his “Drill, Baby, Drill” spirit.

– created the Department of Government Efficiency with Tesla CEO Elon Musk at the helm; aiming to drastically cut government budgets.

– declared a National Energy Emergency by promising to replenish the US strategic oil reserves and export US crude oil to the rest of the world. Trump also promised to end the electric vehicle mandate there.

– Trump revoked 78 of Biden’s executive orders, including rules promoting diversity and gender equality. The new government will recognize only male and female genders, end transgender rights in the military and schools, and repeal protections for LGBTQ+ people and racial minorities.

• CURRENCY & FIXED INCOME: The surge in the DOLLAR has caused the MEXICO PESO to slump more than 1% earlier, while the CANADA DOLLAR fell to a 5- year low of $0.689, although the selloff later eased somewhat. The DOLLAR INDEX (DXY), which measures the strength of the US currency against 6 other major world currencies, was flat at 108.01 after briefly rising to 108.79, failing to reverse the 1.2% slump it lost on Monday in one of its biggest daily declines since November 2023. EURO ended the session flat at $1.04200, having jumped 1.42% the day before.

– The US DOLLAR has indeed gained around 5% since Trump won the November 5th election, as investors brace for additional tariff levies that will likely hurt America’s trading partners. As such, a more measured announcement from Trump on Monday automatically made the US Dollar retreat in order.

– The 10-year US TREASURY YIELD fell 4.7 basis points on Tuesday to 4.558%. The yield is still up about 1% since the Federal Reserve started cutting interest rates in mid-September, reflecting a strong economy and diminishing prospects of a Fed Fund Rate cut this year.

• EUROPEAN & ASIAN MARKETS: European stocks were flat after Asia made slight gains overnight, with investors and governments taking comfort in the fact that the EU and China avoided the imposition of additional tariffs, for now. The STOXX 600 index across continental Europe rose 0.4% while the MSCI Asia ex-Japan stock index rose 0.3%. UK unexpectedly reported Dec unemployment figures that fell significantly less than expected, potentially cooling the Dec Unemployment Rate that had picked up 0.1% in Nov to 4.4%. On the other hand, GERMANY is still fairly pessimistic about the current economic conditions, in contrast to the economic sentiment surveyed in the EUROZONE region reporting improved optimism in Jan.

– While JAPAN’s Nikkei 225 is up 0.32%, CHINA’s CSI 300 is more stable as Trump is not set to take the trade war to a hotter level, in fact he has suspended the ban on TikTok in the US for 75 days. However, he has warned that he could impose more drastic tariffs if China fails to agree to a US deal to become a half-owner of TikTok’s US business under a joint venture scheme. It is believed that the Bamboo Curtain country will not remain silent and has begun to build a counterattack; allegedly a ban on the export of some metals to the US has been prepared as well as sanctions for several US defense companies.

• COMMODITIES: OIL prices fell on Tuesday as investors assessed Trump’s plans to increase US fossil fuel production, as well as tariff delays. BRENT crude plunged 0.8% to $79.50 per barrel, while US WTI slumped 2.3% to $75.90 per barrel.

• INDONESIA: amidst the threat of trade war 2.0 that is prone to start (again), the Ministry of Industry said that Indonesia has a great opportunity to become a relocation destination for Chinese factories if Trump decides to escalate his tariff war with China. Some of the business sectors that could potentially be relocated from China to the Batam Economic Zone include: electronics, textiles, footwear, and automotive. It is alleged that BYD, an electric car manufacturer from China, has dominated EV sales in Indonesia, with a 36% market share reaching more than 15,000 units.

• JCI seemed stuck at the crucial Resistance area of 7200, after rallying above MA50 / 7188 even reaching a high of 7221.73, but unfortunately the increase subsided and had to close plus 11pts only / +0.15% at 7182 level. This Closing level is not enough to confirm the long-awaited bullish reversal pattern, which should give hope to Indonesian capital market investors / traders for the index to be able to move higher towards the Target 7300 or even 7460-7500. With market sentiment containing many uncertainty factors as the most obvious at the moment, NHKSI RESEARCH recommends not to be too aggressive in opening Buy positions, before the signs prove to be bullish. Apply the strategy of gradually increasing the portfolio as the wisest advice. It is not impossible that there will still be waves of sentiment from within the country, including from President Prabowo’s administration which is approaching 100 days.

Company News

• DNET: Salim Group’s Fiberstar Secures Rp5.9 Trillion Credit from Bank Mandiri and BSI
• SAMF: Approved, Saraswanti Stock Split Ratio 1:2
• TPIA: Chandra Asri Talks about Repayment of IDR1.4 Trillion Maturing Bonds This Year

Domestic & Global News
Government Prepares National Strategic Program for Low-Income Housing
Trump Delays Imposition of Tariffs on China, Indonesian Exports Have the Opportunity to Get Benefits

Download full report HERE.