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Economic uncertainty drags down Indonesia's strongest stocks

Jakarta Globe - May 15, 2024

Thresa Sandra Desfika, Jakarta – The geopolitical tensions in the Middle East have significantly impacted the Indonesian stock market (IDX), causing the Jakarta Composite Index to decline from its pre-Eid level of 7,286 to 7,164 after Eid, and further down to 7,083 by the close of trading on Tuesday.

Following Iran's retaliatory strike on Israel, the Indonesian Rupiah also plunged, reaching Rp 16,170 in the first trading session after the long Eid holiday.

Piter Abdullah Redjalam, Executive Director of Segara Research Institute, said the weakening of the Rupiah aligns with the trend of declining currencies in emerging markets amidst peak global uncertainty.

Even stocks with strong fundamentals, which had risen since the end of 2023 and soared during February and March 2024, plummeted due to increasing uncertainty. This included large-cap non-bank stocks.

"The Middle East factor has caused a market crash, affecting not only mediocre stocks but also large-cap stocks that support the index across sectors such as banking, energy, manufacturing, and telecommunications," Piter Abdullah told reporters in Jakarta on Tuesday.

For instance, Bank Central Asia's (BBCA) stock, which reached Rp 10,325 per share before the Eid holiday, fell to Rp 9,475 following Iran's strike on Israel on April 16 and hit a low of Rp 9,350 on April 22. Similar declines were seen in other bank stocks, such as state-owned Bank Mandiri.

Despite these declines, the fundamentals of these banks remained strong in the first quarter of 2024. BBCA recorded a profit of Rp 12.9 trillion, up 11.7 percent year-on-year.

Bank Mandiri also posted a profit of Rp 12.7 trillion (up 1.13 percent year-on-year), State-owned BRI reported a profit of Rp 15.88 trillion (up 2.45 percent year-on-year), and Bank BNI achieved a profit of Rp 5.33 trillion (up 2 percent year-on-year).

"This indicates that the drop in stock prices is entirely unrelated to the financial performance of the companies," Piter explained.

Similarly, the stocks of other non-bank issuers, such as state-owned telecommunications company Telkom, also came under pressure.

In the first quarter of 2024, Telkom recorded revenue of Rp 37.4 trillion, growing 3.7 percent year-on-year. Telkom's EBITDA increased by 2.2 percent year-on-year to Rp 19.4 trillion, with net profits reaching Rp 6.1 trillion. Piter noted that Telkom's performance was supported by its subsidiaries. In the first quarter of 2024, Telkomsel remained the largest contributor to Telkom's revenue.

According to Piter Abdullah, Telkom faces more challenging conditions in the telecommunications industry.

"The telecommunications sector is undergoing a disruption process that demands a quick and precise response. Failure to formulate transformation steps can have fatal consequences for the company's continuity," he said.

Astra's (ASII) stock also dropped by 9.75 percent in trading on May 14. Year-to-date, the stock has plummeted by 19.65 percent. Astra's shares plummeted to their lowest level in the past year due to declining car sales.

Source: https://jakartaglobe.id/news/economic-uncertainty-drags-down-indonesias-strongest-stock