Trump and Budget Cuts Make IHSG Drop 3 Percent Since Early 2025

JAKARTA, KOMPAS - Various domestic and international policies that create a lot of economic uncertainty have reduced investor confidence in the stock market. The movement of stock prices in the Composite Stock Price Index has also remained in the red zone over the past month.

The Director of Development of the Indonesia Stock Exchange (IDX), Jeffrey Hendrik, acknowledged that currently, uncertainty is affecting the global market. This situation caused the Composite Stock Price Index (IHSG) on Thursday (6/2/2025) to reach 6,870, a drop of more than 2 percent compared to the opening position of trading the previous day at 7,024.

The opening position as of this Thursday brings the Jakarta Composite Index (IHSG) to its lowest point since early 2025. Since the closing on the first trading day of this year at 7,163, the IHSG has already weakened by more than 3 percent.

The main factor triggering this condition, according to Jeffrey, is the United States (US) trade tariff policy towards China, as well as the economic dynamics of the US with other countries such as Canada and Mexico. Policies that have been announced but then postponed create increasing uncertainty for the global market.

Uncertainty in the global market also affects currency exchange rates, trade policies, and global supply chains. The dynamics of this economic constellation present unique challenges for business actors in Indonesia.

"With this uncertainty, investors must be more cautious in making investment decisions, especially in facing the possibility of greater fluctuations in the domestic financial market," he said.

Uncertainty in global markets also impacts currency exchange rates, trade policies and global supply chains.

The Chief Economist of Bank Mandiri, Andry Asmoro, stated that the trade tensions between the US and major partners such as China remain a significant factor affecting the financial markets and the prospects for domestic economic growth. The pressure on the US manufacturing and export sectors due to the trade war impacts the US Central Bank, The Federal Reserve (The Fed), making it increasingly difficult to determine benchmark interest rate policies.

The Federal Reserve's indecision on whether to continue its interest rate tightening policy to curb still-high inflation or to lower interest rates to stimulate growth, according to Andry, will determine foreign investors' decisions. This uncertainty could cause foreign investors to hold back their money from entering Indonesia.

Moreover, from a domestic perspective, Indonesia's economic growth in 2024 is only projected to grow by 5.03 percent, slowing down from 5.05 percent in 2023 and 5.31 percent in 2022 on an annual basis.

Pilarmas Investindo Sekuritas, in this afternoon's stock exchange trading release, said that in addition to global economic factors, the market is worried about Indonesia's economic growth in 2024 as announced by BPS several days ago.

Another factor is the budget cuts of ministries, state institutions, and regional governments, as mandated by Presidential Instruction Number 1 of 2025 concerning efficiency of spending and implementation of the APBN and APBN.

The policy of cutting with an accumulation target of Rp 306 trillion is feared to have a negative impact on the national economy. For example, it reduces public investment, job creation, and labor productivity, as well as reducing people's purchasing power.

"So the market is worried that this will impact GDP this year, where government consumption contributes to GDP," they said.

Jeffrey reminded investors to anticipate the impact of global uncertainty by learning from previous periods of uncertainty. Although it is difficult to predict how this condition will develop, analysis of government policies, reactions from other countries, and historical trends can be a guide in making more mature investment decisions.

In order to help investors deal with uncertain market conditions, the IDX plans to launch several new financial instruments. One of the products that will soon be introduced is short selling and intraday short selling.

Short selling is a transaction of selling securities borrowed from registered exchange members by traders or merchants. Traders sell when the price of a security is high and buy it back when the price of the security falls at the end of the same day in order to make a profit.

The latest trading rules were formalized with the issuance of approval for the Amendment to the Indonesia Stock Exchange (IDX) Regulation Number III-I concerning Margin Membership and/or Short Selling. Then, Regulation Number II-H concerning Requirements and Trading of Securities in Margin Transactions and Short Selling Transactions.

"This product is expected to provide more strategy options for investors, especially when the market experiences high fluctuations in a short period of time," said Jeffrey.

BEI is targeting the launch of this instrument in the near future, around March or early Q2-2025. Currently, they are still processing the finalization of permits for exchange members who will provide short selling services.

"With this new strategy, investors are expected to be able to more optimally manage their portfolios amidst dynamic and challenging market conditions," he said.