M Ghafur Fadillah, Ria Fortuna Wijaya, Associated Press, Jakarta – Indonesian stocks extended their decline on Wednesday as investors reacted to a mix of domestic pressures, including Bank Indonesia's aggressive rate hike, concerns over tighter state control of commodity exports, and continued weakness in the rupiah, overshadowing broader regional market weakness tied to rising global bond yields and Middle East tensions.
Jakarta Composite Index (JCI) fell 0.82%, or 52 points, to close at 6,318 after swinging between 6,215 and 6,459 during the session. Trading volume reached 40.42 billion shares with turnover totaling Rp 21.7 trillion ($1.22 billion) across more than 2.45 million transactions. Decliners outpaced gainers 483 to 208, while 126 stocks were unchanged.
Market sentiment deteriorated after Bank Indonesia unexpectedly raised its benchmark BI Rate by 50 basis points to 5.25% on Wednesday, reinforcing expectations that policymakers are prioritizing rupiah stability over growth amid mounting global volatility.
Investors were also unsettled by President Prabowo Subianto's plan to establish a state-controlled export body that would centralize all Indonesian natural resource commodity exports through a single entity.
Pilarmas Investindo Sekuritas said the policy was intended to optimize state revenue and secure domestic supply, but warned the market had started to question whether rising government intervention could weaken investment appetite in the commodity sector.
"Markets currently need more than just positive sentiment. They need confidence. When global conditions begin to stabilize but the JCI continues to fall, it means investors are waiting for clarity on Indonesia's economic direction," capital market observer and Republik Investor founder Hendra Wardana said on Tuesday.
Hendra said Prabowo's parliamentary speech could become a key moment for markets as investors look for clearer fiscal policy direction, measures to stabilize the rupiah, and assurances that the government remains supportive of financial market stability and the business sector.
"If the speech can provide policy clarity, fiscal discipline, and signals supporting market stability and businesses, then sentiment could improve and the JCI may have room for a technical rebound. But if investors see no concrete steps to restore confidence, pressure on domestic markets could continue," he said.
Pilarmas said global sentiment also remained negative as Asian markets tracked Wall Street lower amid surging US Treasury yields and escalating concerns that the US-Iran conflict could fuel another wave of global inflation.
"Rising US bond yields and uncertainty over the Fed's interest rate direction are reducing investor appetite for risk assets," Pilarmas wrote in its daily research note on Wednesday.
"At the same time, geopolitical tensions and soaring oil prices are increasing concerns over global inflationary pressures."
The brokerage said prolonged conflict in the Middle East had effectively disrupted the Strait of Hormuz, a key global energy shipping route, pushing oil prices higher and worsening inflation concerns.
US President Donald Trump further intensified geopolitical tensions after threatening to continue attacks on Iran within the next two to three days if Tehran failed to accept Washington's peace terms.
Pilarmas said market expectations had shifted sharply from anticipating Federal Reserve rate cuts this year to the possibility of another US rate hike before year-end.
Philadelphia Federal Reserve President Anna Paulson also reiterated support for keeping rates unchanged until inflation shows a sustained decline.
Meanwhile, investors remained cautious ahead of Friday's US Senate vote on Kevin Warsh's appointment as the next Federal Reserve chairman.
Regionally, Asian markets also ended lower on Wednesday as rising bond yields pressured equities and weakened momentum in technology shares.
Japan's Nikkei 225 fell 1.2%, while Hong Kong's Hang Seng declined 0.6%. China's Shanghai Composite slipped 0.3%, and South Korea's Kospi lost 0.9%.
On Wall Street overnight, the Dow Jones Industrial Average fell 0.6%, while the Nasdaq Composite dropped 0.8%.
Separately, Danantara CEO Rosan Roeslani maintained that Indonesian equities, particularly state-owned banks, still offered attractive long-term investment opportunities.
"The capital market is part of Danantara's long-term investment space. State-owned bank stocks are currently offering yields of around 10-11%," Rosan said.
"Fundamentally they remain strong, and valuations are also attractive. Especially our state-owned stocks listed on the exchange that offer yields above 10-11%. In our view, that is very attractive."