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Scaling Peaks: Indonesia's Composite Stock Index Shatters Records

Updated: Apr 24

In recent trading sessions, Indonesia's Composite Stock Price Index (IHSG) has exhibited remarkable strength, reaching a new record high of 7,373.96 on Thursday (3/7). This surge reflects the market's resilience driven by positive sentiments from both domestic and global factors. The buoyant performance in Asian stock markets and Wall Street's record-breaking streak have instilled confidence in Indonesian market investors. Maintaining levels above the nearest support at 7,238 positions the IHSG for potential further gains, with analysts from MNC Sekuritas pointing to a next resistance at 7,403. The recent successes in the Indonesian stock market are underpinned by favorable political developments, including the clarity provided by the 2024 general elections and the potential continuity of economic policies under President Joko Widodo. The current lead of the Prabowo Subianto-Gibran Rakabuming Raka pair, with a substantial 58.82% of the accumulated votes, according to the Komisi Pemilihan Umum (KPU), has contributed to a positive market sentiment. Analysts interpret the market's response as an expectation of economic stability and minimal changes in policies. Political stability, combined with optimistic projections of a 5.2% economic growth in 2024, supports the positive trajectory of the IHSG. Looking ahead, market observers are closely monitoring key levels on the IHSG for potential signals of sustained upward momentum. Having breached the previous resistance and exhibited strength above 7,238, attention turns to the next resistance at 7,403.

The Federal Reserve Chair, Jerome Powell, mentioned that the Fed interest rate cuts will begin this year. He stated that inflation had "eased notably" over the last year, with no notable increases in unemployment. Even though rising immigration has increased the number of workers available, the labor market remains "relatively tight." The central bank chief's speech echoed what the public has heard from policymakers in the weeks since the Federal Open Market Committee's January meeting. The Fed believes that the interest rate policy will likely peak in this tightening cycle if the economy expands broadly as forecast, so it may be prudent to begin easing policy later this year. The United States inflation rate is currently at 3.1% yoy, which is lower than the prior period's rate of 3.4%. Despite the sloping curve, US inflation is 2.9% year over year, above market expectations. In addition, Powell also mentioned that with the current economic outlook remaining uncertain, progress toward the 2% inflation target is not guaranteed. The statement given by the US Federal Reserve indicating that interest rates will decrease this year has given a positive reaction not only to Indonesia's Composite Stock Price Index (IHSG) but also to the Indonesian rupiah that experienced a marginal decline of 0.32%, settling at Rp15,654 per US$. The fluctuation in the exchange rate reflects the dynamic nature of the foreign exchange market and the interconnectedness of regional currencies.

The Federal Reserve's signaled intent to ease interest rates presents both opportunities and challenges for the Indonesian capital market. A decrease in US interest rates typically leads to capital outflows from developed markets to emerging markets like Indonesia, seeking higher returns. This influx of foreign capital has the potential to further boost the IHSG. As the US dollar weakens, the Indonesian rupiah tends to appreciate, making Indonesian assets more attractive to foreign investors. Moreover, lower US interest rates reduce borrowing costs for Indonesian companies, potentially spurring investment and economic growth, which could translate into further gains for the stock market. However, it is important that this relationship is not always perfectly linear. Investors will also closely consider the Indonesian economy's fundamentals, including its inflation rate, GDP growth projections, and political landscape. A perception of increased risk or uncertainty in the Indonesian market could offset the positive effects of lower US interest rates. Additionally, while easing by the Fed can initially provide market support, a sudden reversal of policy or unexpected interest rate hikes could trigger volatility and potentially lead to capital flight from emerging markets. Therefore, it is crucial for Indonesian policymakers and market regulators to maintain a conducive investment environment. This involves implementing sound economic policies, safeguarding macroeconomic stability, fostering transparency, and ensuring corporate governance within listed companies.



Liputan 6


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