Jakarta – In a way, a country's stock market performance is like a report card for the national economy, and by extension for the government, and in Indonesia's case right now, the report is not pretty.
We might not have an "F" yet, but we probably have a "D" or "D minus."
On Tuesday, the Indonesia Stock Exchange (IDX) Composite index plunged more than 7 percent in the morning trading session, before recovering somewhat but still closing the day down 3.84 percent, while other stock markets of the region made solid gains.
Many analysts have since added their two cents to explain what happened on Tuesday. While their explanations differ, there is near-consensus that domestic factors rather than external ones are to blame.
That much seems obvious, given how the IDX stood out as the big loser that day.
An element of panic selling was likely present, and leveraged bets closed by margin calls could have added fuel to the fire, but something must have sparked it first. One analyst pointed to large selloffs in a small number of IDX heavyweights as the cause.
From there, the selloff appears to have spread to other stocks as investors follow the crowd for the emergency exit. Some got trampled in the stampede and never made it to the door as their positions got liquidated on the way.
Maybe they are the ones President Prabowo Subianto had in mind when he declared last December that, "for poor people, [playing the stock market] is generally the same as gambling. Only the big ones win, the strong ones."
The number of individual stock market investors has risen exponentially in recent years. That is not necessarily a bad thing, but the latest event suggests some may be taking on more risks than they should by joining the game on borrowed funds.
The next morning, the Financial Services Authority (OJK) responded by making it easier for companies to buy back their shares, as they no longer need to call a general shareholder meeting first.
That seems like a sensible move to facilitate a prompt recovery from sudden, unjustified selling bouts and thereby nip crowd panic in the bud. The OJK might want to make that change, currently planned for six months, permanent.
Tuesday was ugly for investors in Indonesia's stock market, but the longer timeframe looks no better. The year-to-date chart is a sight to behold, with the trajectory of a heavy object thrown forward but then descending in an increasingly steep curve.
It is that medium-term performance that earns our economy a "D minus," because it reflects fundamental doubts about the business prospects here, and about political stability.
Five percent gross domestic product growth is no guarantor of an individual company's profitability. The latter depends instead on consumer demand, industry rules and taxation, the availability of qualified labor, efficient infrastructure, cheap energy and access to global trade for imports and exports.
It also depends on legal certainty, freedom from corruption and extortion as well as a level playing field with state-owned enterprises (SOEs).
The government has significant control over each and every one of those aspects, and investors expect them to be thinking and talking about those more than about GDP growth.
Five percent, or even 8 percent – that unrealistic target the government still holds dear – is all fine and dandy, "but what about my profit margin?" we hear businesspeople say.
In recent reports, Goldman Sachs and Morgan Stanley cut their respective views on Indonesian equities, both mentioning corporate earnings as a key concern.
Rumors about the possible impending resignation of Finance Minister Sri Mulyani Indrawati, who has long instilled market confidence in Jakarta's fiscal policy, may also be playing a role.
Portfolio investors are a fickly bunch and can be out the door in a jiffy if they see better prospects elsewhere. The recent trend of the IDX Composite index is a vote of no confidence.
Source: https://www.thejakartapost.com/opinion/2025/03/20/idx-investors-voting-with-their-feet.htm