Indonesia's Stock Index Shows Signs of Recovery Amid Geopolitical Tensions
Jakarta — Indonesia’s composite stock index (IHSG) has begun recovering after a sharp decline. The index closed up 1.41 per cent at 7,440.91 at the end of trading on Tuesday.
Capital market analyst and founder of Republik Investor, Hendra Wardana, stated that the market is attempting to rally following previous pressure caused by heightened geopolitical tensions between the United States, Israel and Iran.
According to Wardana, uncertainty surrounding the conflict remains a key factor affecting global investor sentiment, including in Indonesia’s stock market. Despite this, volatility risks remain significant as geopolitical tensions have not fully subsided. As long as the conflict continues to develop, global markets tend to move sensitively in response to geopolitical news developments and energy prices.
In the short term, Wardana estimates the IHSG will continue moving within a range with consolidation tendencies. Should external pressures intensify, further declines could occur towards the 7,250-7,300 level, which represents both a key technical support and strong psychological barrier. However, as long as the IHSG remains above this level, opportunities for continued rebounds remain open.
“From a valuation perspective, geopolitical risk has begun to be reflected in share prices, but is not yet fully priced in. This is evident from foreign fund flows, which have recorded substantial net selling even as the index has strengthened,” Wardana explained.
Global investors remain cautious, as geopolitical conflict could impact energy price stability, global inflation and interest rate policy direction. Consequently, despite the market rebound, institutional investors are waiting for certainty on the conflict’s direction before aggressively increasing exposure in emerging markets, including Indonesia.
Should external pressures intensify further, the IHSG is estimated to have strong fundamental support at the 7,200-7,300 range. This level is considered attractive as it has historically served as an area of institutional investor accumulation and reflects relatively cheaper market valuations. At this level, the risk of further decline typically becomes limited as many blue-chip stocks are already trading at fundamentally attractive valuations.
“From a market valuation perspective, the IHSG is currently in quite an attractive condition,” Wardana concluded.