27 August Demonstration Will Not Automatically Weaken Rupiah and JCI
The planned demonstration on 27 August is not expected to automatically weaken the rupiah exchange rate or the Jakarta Composite Index (JCI). The market tends to pay more attention to security stability and global economic fundamentals than to mass action alone.
Researcher at the Center of Reform on Economics (CoRE) Indonesia, Yusuf Rendy Manilet, explained that market participants do not respond reactively to demonstrations unless the action involves a very large scale of masses or triggers violence. According to him, investors are more concerned with potential disruption to economic activity and long-term policy stability.
“The action planned in front of the DPR Building is currently still relatively limited with a diverse agenda. As long as it proceeds in an orderly manner and does not cause major disruption, its impact on the rupiah and JCI is likely to be only temporary,” Yusuf said on Tuesday (25/8).
Nevertheless, Yusuf noted that the risk of market pressure remains if there is an escalation of violence or damage to public facilities. This could increase the perception of political risk in the eyes of investors, potentially triggering selling in the capital market.
From the real economy side, disruption to business activity and congestion in the Senayan area is predicted to only depress daily transactions locally. The impact on the national economy is considered minimal as long as the action remains centred in Jakarta and does not spread to other strategic areas.
Yusuf stressed that market attention is currently focused more on external factors and macro indicators. Foreign fund flows, US dollar movements, global market conditions, the current account deficit, and energy price fluctuations are the main determinants of current financial market movements.
“The rupiah exchange rate could weaken even if the action proceeds peacefully if the US dollar strengthens or global sentiment deteriorates. Conversely, the JCI can still hold up if foreign fund flows continue to enter and the 6,500 level can be maintained,” he added.
As a baseline scenario, rupiah and JCI volatility is predicted to increase only on the day of the action. However, there is no indication that the weakening will be significant or prolonged. After the action ends, the market is expected to return to responding to fundamental conditions and international capital flows.