IHSG Weakens Amid Investor Hopes for Fiscal Deficit Staying Below 3 Percent
The Composite Stock Index (IHSG) of the Indonesia Stock Exchange (IDX) closed weak on Monday afternoon amid market participants’ expectations that Indonesia’s fiscal deficit will remain below 3 percent.
The IHSG closed down 114.92 points or 1.61 percent to 7,022.29. Meanwhile, the group of 45 leading shares or the LQ45 index fell 14.60 points or 2.01 percent to 713.72.
“Investor expectations currently remain focused on keeping the deficit below 3 percent,” said Rully Arya Wisnubroto, Head of Research and Chief Economist at Mirae Asset Securities, when contacted by Antara in Jakarta on Monday.
Rully stated that there is indeed concern about fiscal deficit expansion, which has also prompted several global rating agencies to downgrade their rating outlooks for Indonesia.
“I believe this is understandable given the still-weak state revenue,” said Rully.
He explained that the potential widening of the fiscal deficit would not have a direct impact on the Indonesian stock market; however, it would work through interest rate or monetary policy channels.
Furthermore, he continued, rating outlook has a significant impact on State Securities (SBN) yields, which are typically the risk-free rate, as a variable that influences stock valuations.
Coordinating Minister for Economic Affairs Airlangga Hartarto proposed the establishment of a Government Regulation in Lieu of Law (Perppu) to anticipate worst-case scenarios from the conflict between the United States and Iran that could potentially widen the state budget deficit relative to gross domestic product to above 3 percent.
“In the worst-case scenario, the pessimistic one, with crude oil prices at 115 U.S. dollars per barrel, our rupiah exchange rate at Rp17,500 per dollar, growth at 5.2 percent, state securities yield at 7.2 percent, the deficit would be 4.06 percent,” Coordinating Minister Airlangga told President Prabowo during a Full Cabinet Session.
West Texas Intermediate (WTI) crude oil was recorded at 97.80 U.S. dollars per barrel, whilst Brent was at 104.82 U.S. dollars per barrel, according to trading data at 17.00 Western Indonesia Time. Meanwhile, the price assumption for Indonesian crude oil (ICP) was set at 70 U.S. dollars per barrel in the 2026 state budget.
On the other hand, this week, market participants are awaiting monetary policy announcements from the U.S. Federal Reserve (The Fed) and Bank Indonesia (BI) regarding the direction of their benchmark interest rates.
The Fed is scheduled to announce the results of the FOMC meeting on Wednesday (17 March), whilst BI is scheduled to announce the results of the RDG meeting on the same day (17 March).
Opening weak, the IHSG remained in negative territory through the closing of the first trading session. In the second session, the IHSG remained in the red through the close of trading.
Based on the IDX Sectoral Index, nine sectors declined, with the property sector falling the most at 2.33 percent, followed by the energy sector and raw materials sector, which fell 2.29 percent and 1.66 percent respectively.
Meanwhile, two sectors gained, led by the healthcare sector, which rose 0.12 percent, followed by the non-primary consumer goods sector, which rose 0.02 percent.
As for stocks that experienced the largest gains, they included PSDN, TRIN, LRNA, EMAS and TRUE. Meanwhile, stocks that experienced the largest declines were BRMS, ZATA, KUAS, ASPR and AMMN.
The frequency of stock trading was recorded at 1,674,892 transactions with a total of 32.05 billion shares traded worth Rp15.92 trillion. A total of 180 shares gained, 542 shares declined, and 98 were unchanged.
Regional Asian stock exchanges this afternoon included the Nikkei Index declining 68.50 points or 0.13 percent to 53,751.10, the Shanghai Index declining 10.66 points or 0.26 percent to 4,084.79, the Hang Seng Index gaining 368.41 points or 1.45 percent to 25,834.02, and the Straits Times Index gaining 26.41 points or 0.55 percent to 4,868.69.