After the Jakarta Composite Index ( IDX Composite ), an index of all stocks listed on the exchange, dropped by as much as 7.1 %, the market’s biggest intraday decline since September 2011, the Jakarta Stock Exchange forced an emergency trading stop at 11:19 local time today.
The business decline highlights growing concern among buyers about the way of economic policy under President Prabowo Subianto, even though shares rebounded a little, closing down -3.8 % at the end of the trading day.
In 2025, Indonesian shares are currently among the worst performing companies in the world. Some of Indonesia’s blue-chip companies have experienced sharp declines since Prabowo’s opening on October 20, 2013.
In what one analyst described as” a good old-fashioned panic,” something suddenly appeared to snap, with the index collapsing in a way unobserved during the pandemic. The last time the exchange was forced to halt trading temporarily was late in 2020 due to a 5 % or more decline.
International currency has also been quickly leaving the nation. According to Bank Indonesia, as of March 13 the stock market had experienced a year-to-date net sell of 22.21 trillion rupiah ( US$ 1.35 billion ).
According to the central bank’s trip record, 10.5 trillion rupees were dumping foreign stocks and federal securities in the nation last week alone.
The business sell-off comes after months of subpar financial performance. In January, Bank Indonesia downgraded its economic growth forecast for 2025 to 4.7%-5.5 % from 4.8%-5.6 % previously.
Despite the continued decline in the rupiah in relation to the US dollar, it also unexpectedly reduced benchmark interest rates from 6 % to 5.75 %.
Since soon 2024, consumer spending, which accounts for more than half of Indonesia’s economic engagement, has decreased. Indonesia experienced its first recession wave in more than 20 years in February, with a 0.09 % decline in the consumer price index.
The other main driver of Indonesia’s progress is being negatively impacted by the decline in global commodity prices. One of Indonesia’s most significant export, coal, has experienced a decline in prices on world markets. Nickel, which has recently become a significant new trade, does the same.
In the meantime, there is little trust in the government’s ability to deal with these issues. Prabowo praised a number of populist policies on the campaign trail last year that focused on home processing of organic materials and spending on security programs.
Some investors were hoping that Sri Mulyani Indrawati, the country’s symbolic finance minister, would help keep the government’s monetary policy orthodox after her unexpected decision to remain under Prabowo.
However, those expectations have largely evaporated. The government of Prabowo has recently begun a drastic reduction in government spending, including a 75 % reduction to the infrastructure budget.
The government’s new holding company for state-owned enterprises ( SOEs ), Daya Anagata Nusantara Investment Management Agency, aka Danantara, will receive the money to fund two favorite projects: a free school lunch program and providing capital for Danantara, the government’s new capital firm.
In particular, Danantara has sparked inventory business concerns. With property corresponding to 55 % of GDP in 2023, SOEs are a significant part of Indonesia’s business. Danantara today controls seven of the world’s largest SOEs, including Telkom Indonesia, Pertamina, Pertamina, MIND ID, PLN, and three lenders.
Following the launch of the bank, concerns about leadership led to a spike in the share prices of the three state-owned businesses, Bank Mandiri, Bank Rakyat Indonesia, and Bank Negara Indonesia. Roesan Roesalni, the firm’s CEO, also serves as the minister of expense.
There are concerns that the bank may be used as a sizable piggy bank for state projects as the new holding company places the companies outside the purview of the political body and shifts their dividends away from the financing ministry.
Another decisions have also had an impact on sentiment. Due to difficulties in implementing a new program, state tax collection has fallen sharply. In addition, government initiatives to raise mining royalty prices have sparked protests from businesses that are already dealing with declining worldwide commodity prices.
More unorthodoxy may be on the plan, according to rumours that Finance Minister Sri Mulyani perhaps soon retire due to disagreements with the leader. The brother of Prabowo is Thomas Djiwandono, the deputy finance secretary and Sri Mulyani’s good leader.
In the meantime, the government has pushed the government to write off a number of loans held by state-owned businesses to MSMEs and to cooperatives.
One trader who requested anonymity claimed that “people are extremely believing there isn’t a strategy to develop the mid class.” ” Even spending on free this and free that,” the saying goes. If there isn’t true state budget management, people might also dump government bonds.