Indonesia’s stock market plunges while others shine

March 19, 2025

The suspension was the first one since the coronavirus pandemic and came after the index was at one point down 7.1 percent, before staging a partial rebound in the afternoon session.

The sudden drop prompted House of Representatives Deputy Speaker Sufmi Dasco Ahmad, a senior figure in President Prabowo Subianto’s Gerindra Party, to pay a visit to the IDX building in the afternoon, accompanied by several legislators.

Tuesday, when the bourse recorded Rp 2.5 trillion (US$153 million) in net sales by foreign investors, extended the market’s losing streak to four consecutive trading days, bringing total losses to 6.9 percent.

Since the start of the year, the IDX Composite has shed some 12.1 percent, with foreign investors offloading Rp 29.4 trillion in net sales.

This contrasts with the wider region, where equities have been posting gains in recent days.

Hong Kong’s Hang Seng index led Asian markets after adding 2.5 percent on Tuesday to hit a three-year peak. Driven by tech stocks, the index has gained around 23.3 percent so far this year.

India’s Sensex and Japan’s Nikkei 225 indexes followed with a 1.5 percent and 1.2 percent rise, respectively.

Fanny Suherman, head of retail research at BNI Sekuritas, attributed Hong Kong’s rally to China’s latest economic stimulus measures, which include efforts to boost household income and increase consumer spending, stabilize the stock and real estate markets, as well as encourage higher birth rates.

Read also: Dark cloud hangs over RI economy amid declining confidence in fiscal policy

Fikri Permana, an economist at local brokerage KB Valbury Sekuritas, noted that global investment banks had recently turned less optimistic on Indonesian equities.

Goldman Sachs in a March 7 report cut its rating on Indonesia’s stock market from “overweight” to “market weight”, citing weaker corporate earnings and tighter banking system liquidity as key concerns.

Morgan Stanley lowered its rating on the MSCI Indonesia Index from “equal weight” to “underweight” and pointed out that earnings revisions for local firms had been among the weakest in the region, while medium-term returns on equity were eroding.

The abrupt reversal of a planned VAT hike, along with across-the-board budget cuts, had fueled market unease, the firm stated. Such uncertainty over fiscal policy had weighed on the rupiah exchange rate and dampened corporate confidence.

“If policy uncertainty continues to linger, we think it will further pressure corporate sentiment,” Morgan Stanley economist Derrick Kam warned in the February report.

Adding to market jitters, Fikri highlighted concerns over politics, including rumors that Finance Minister Sri Mulyani Indrawati could be about to step down and potentially be replaced by First Deputy Finance Minister Thomas Djiwandono, President Prabowo Subianto’s nephew.

“The market may not really like [this potential appointment],” he told The Jakarta Post on Tuesday.

Fikri also pointed to legislative moves to revise the Indonesian Military (TNI) Law, which some critics argue could undermine democracy, and to the creation of Danantara, Indonesia’s new sovereign wealth fund led by ministers and government-affiliated individuals.

While economic fundamentals are showing some signs of weakening, such as sluggish consumer demand and retail sales, he noted that the downturn was not severe.

In fact, Indonesia’s manufacturing sector has been expanding, with S&P Global’s Purchasing Managers’ Index (PMI) hitting its highest level in nearly a year last month.

“This isn’t like the pandemic-driven crash, where stock market [trading] had to be halted over fundamental economic concerns,” Fikri said. “It’s more about concerns on policy, meaning that the government’s recent moves seem unfavorable or lacking independence in the eyes of investors.”

Andre Benas, head of research at BCA Sekuritas, noted that investors were increasingly wary about Indonesia’s economic stability, citing a “lack of direction” in policymaking and the contentious revision of the TNI Law as key concerns.

“The rumors surrounding Sri Mulyani’s potential resignation have only added [to market anxiety],” he told the Post on Tuesday.

Read also: Prabowo’s economic policies put investors on edge

The finance minister pointed out that, despite recent outflows from the stock market, Indonesia had recorded capital inflows of Rp 17.53 trillion (US$1.06 billion) from foreign investors into government bonds since the beginning of the year.

She also called on the managers of publicly-listed state-owned enterprises (SOEs) and their newly formed superholding, Danantara, to assure investors that the firms would be managed professionally and transparently to restore public trust.

However, when pressed about rumors of her potential resignation, Sri Mulyani remained noncommittal.

“For now, I remain focused on my duty to the state, fulfilling the trust of the President and managing the country’s finances in a professional manner,” she said on Tuesday.