JCI Fell Nearly -5% Yesterday, How Are We Positioned?
Continue reading to learn about our outlook and how we're positioned.
Dear Clients,
Market volatility and geopolitical risks resulted in a decline of the Jakarta Composite Index (JCI) by nearly 5% yesterday. Meanwhile, commodity prices like oil, gas, and coal prices have increased significantly given the US/Israel-Iran war.
Yesterday, the JCI reached an intraday low of -6.67% but closed out at -4.57%. Meanwhile, our Simpan Sustainable Equity Fund saw a maximum decline of around -6%, before recovering to close the day at approximately -5%, slightly underperforming the JCI. Our Balanced Fund and Amanah Syariah Fund outperformed the JCI, reflecting the benefit of diversified portfolio positioning during volatile market conditions. All our AMP portfolios outperformed the JCI.
The Investment Team is monitoring developments closely, responding tactically, and actively managing the portfolios within our funds. Despite market volatility, our portfolio is well positioned with a higher weighting in commodities (see previous articles). We continued to increase our position in commodity names over the past few weeks in light of heightened geopolitical risk and rising commodity prices.
In the short-term, we expect significant market volatility and price swings as the market adjusts to the development of the Middle Eastern war. We advise clients to brace heightened volatility in their portfolios, while we manage actively across our strategies. When markets stabilize, we think that it is an opportune time to invest further.
Fund Performance
What’s Behind JCI’s Drop Yesterday?
Fitch downgraded Indonesia’s credit outlook from “Stable” to “Negative”, citing rising policy uncertainty, continued government spending pressures, and reduced national budgets revenue intake. This follows a similar outlook downgrade earlier by Moody’s last month. The news weighed on investor sentiment, triggering foreign outflows of ~IDR 214B.
Ongoing geopolitical tensions hit Asian markets due to concerns over potential disruptions to the Strait of Hormuz, a critical global oil shipping route. Higher oil prices pressure certain Asian markets, which are net oil importers. This triggered a wave of panic selling in Asian markets; KOSPI saw a trading halt of 5 minutes and dropped -12%.
Domestic and global inflationary pressures continue to build due to rising oil and gas prices, creating uncertainty in any rate cut expectations.
Recently, KSEI also released the data of shareholders with ownership of above 1% in a stock in the JCI, prompting investors to reposition their holdings, adding to market volatility.