Fundamentals Strong, Indonesian Shares Fall Due to Investor Perception

The decline in the Indonesian stock market is more influenced by investor perception than by a deterioration in the fundamentals of the domestic economy or listed companies, according to Mukhamad Misbakhun, Chairman of Commission XI of the House of Representatives (DPR RI).

Misbakhun stated that Indonesia’s macroeconomic indicators remain solid. He noted that the country’s economic growth reached 5.61% in the first quarter of this year, up from 5.39% in the previous quarter, placing it among the highest in the G20. Foreign exchange reserves remain strong at approximately US$145 billion, despite a decline from a peak of US$156 billion. Inflation is within the government’s target range, and the trade balance has recorded a surplus for 61 consecutive months.

In the financial sector, Misbakhun emphasised that the national banking industry remains healthy, with no banks requiring special handling from the Financial Services Authority (OJK). While acknowledging some corporate issues, including problems in the infrastructure sector and cases of default, he assessed that the impact on the overall financial system is limited and that the government has prepared resolution measures. He also highlighted that state-owned banks continue to post strong performance and consistently distribute dividends.

Misbakhun concluded that the pressure on the stock market, which has seen the Jakarta Composite Index (IHSG) fall by more than 30% year-to-date, is largely due to external factors. He specifically cited high interest rates in the United States as a key driver of capital outflows and shifting investor perceptions towards emerging market assets. The government is continuing to strengthen the financial system’s foundation through the implementation of the Financial Sector Development and Strengthening Law (UU P2SK).