IHSG Falls by 6 Percent, Observer: Investors Afraid of Domestic Conditions

JAKARTA, KOMPAS - The Composite Stock Price Index plummeted by more than 6 percent during the first trading session on Tuesday (18/3/2025). Analysts believe that recent national economic and political dynamics have burdened the stock market.

The Composite Stock Price Index (IHSG), which opened today at the level of 6,472, dropped to 6,076 or decreased by 6.12 percent at the end of the first trading session. Sectorally, all types of stocks experienced corrections, with significant declines in the technology sector (-12.46 percent), the basic materials sector (-9.78 percent), and the energy sector (-6.24 percent).

The decline in the IHSG does not align with the performance of several daily stock markets overseas. Japan's Nikkei, for instance, grew positively by 1.4 percent, Hong Kong's Hang Seng rose by 1.8 percent. Meanwhile, China's Shanghai Stock Exchange increased by 0.1 percent, and U.S. stock markets such as the Dow Jones and Nasdaq rose by 0.85 percent and 0.31 percent, respectively, on a daily basis.

This decline in the JCI is not in line with the performance of several daily stock markets on foreign exchanges.

Responding to the situation in the domestic capital market, the Indonesia Stock Exchange (IDX) froze stock trading or trading halt at 11:19 a.m. Jakarta Automated Trading System time after the JCI fell 5 percent. The trading halt aims to protect the integrity of the stock market and ensure that all investors are informed of changes in market conditions.

The Head of the Capital Market Supervision Department's Order 2A OJK (Financial Services Authority) Number S-274/PM.21/2020, issued on March 10, 2020, stipulates that a trading halt is carried out within a 30-minute period every time the IHSG decreases by a multiple of 5 percent.

If the IHSG decline reaches more than 15 percent, then stock trading will be stopped (suspended). The suspension of trading can last until the end of the trading session or even more than one session. However, this step requires approval from the OJK.

Senior Stock Analyst at NH Korindo Sekuritas Indonesia, Ezaridho Ibnutama, told Kompas that the decline in the stock market occurred due to foreign investors' concerns over Bank Indonesia's (BI) interest rate cut policy. This decision is being discussed at the meeting on March 18-19, 2025.

"We speculate that foreign institutional investors are concerned about the high risk of a 25 basis point interest rate cut from the current position of 5.75 percent tomorrow," he stated. While awaiting this policy, NH Korindo projects that the IDX Composite will remain in the range of 6,000-6,100.

We speculate that foreign institutional investors are concerned that tomorrow there will be a high risk of a 25 basis point interest rate cut from the current position of 5.75 percent.

Associate Director of Pilarmas Investindo Sekuritas, Maximilianus Nicodemus, in his statement to the media, also emphasized the negative market sentiment regarding domestic economic dynamics.

In addition to waiting for the direction of BI's monetary policy which will be announced on Thursday (19/3/2025), sentiment from the domestic financial performance report released recently has also triggered concerns among market players.

"There is a factor of Indonesia's revenue which has decreased by 30 percent, which has caused the APBN deficit to widen, requiring a larger debt issuance, and of course the rupiah is getting weaker. This has the potential to cause BI's interest rate to be more difficult to decrease," he said.

Tax revenue realization as of February was IDR 269 trillion or dropped 30.19 percent annually. Government spending also fell 7 percent. Meanwhile, the APBN deficit reached IDR 31.2 trillion. As a result, debt rose 44.77 percent in January 2025.

"Everyone is worried that fiscal risks are increasing in Indonesia, which has caused many market players and investors to eventually decide to switch to other investments that are much safer and provide certainty of returns. Stocks are becoming unattractive, and perhaps bonds are the choice after stocks," Nico said.

Stocks are becoming less attractive, and perhaps bonds are becoming the next best option after stocks.

Meanwhile, foreign sentiments are also not spared. Among them is the tariff war. The European Union, for example, has imposed higher tariffs on US products. There are also concerns about an economic recession in the United States.

Paramadina University economist Wijayanto Samirin, through a written statement, also said that the IHSG correction this time was due to the poor results of the February 2025 State Budget. Likewise with the fiscal projections throughout 2025.

"This is the result of unrealistic government policies and no clear technocracy. Then, this is also the result of various mega corruption issues that damage market confidence. This is an old issue that makes investors cautious," he said.

Not only that, Wijayanto added, there are also other policies such as market concerns about major public protests due to regulatory changes that are feared to strengthen the TNI's Dual Function.

There are also concerns that Indonesia's credit rating will drop in the announcements of rating agencies such as Fitch and Moody's in March-April and S&P in June-July 2025.

"This issue is something new that makes investors afraid," Wijayanto added.