Indonesian Strategy:JCI rally set to (continue)fading

Event

After a strong start to the year, since February 5th’s ‘melt up’, the JCI has infact made only limited progress, rising just 0.6% in local currency terms, and3.3% in USD, despite a significant rally in global markets (EM and DM haverisen by 11.1% and 7.1% in USD, respectively). This tepid performance hasbeen in spite of generally positive sentiment and a lot of good-news tailwinds,including a global commodity/EM rally; the Fed’s surprisingly dovish MarchFOMC statement (given the context of V-shaping global markets since earlymidFebruary); and two further BI rate cuts (now totalling 75bp). Whenmarkets fail to rally on good news, it is often a technically bearish signal. Wealso believe a number of headwinds are starting to emerge (below), which arebeing downplayed at present, but will likely become increasingly evident fromhere on. We argue that now may be a good time to consider taking profits.