Investor Confidence Still Recovering Despite Rupiah Strengthening
The strengthening of the rupiah exchange rate against the US dollar in recent times is considered a positive signal for the national economy. However, market participants believe it is still too early to conclude that investor confidence in the credibility of government policy has fully recovered.
President Commissioner of HFX International Berjangka, Sutopo Widodo, said the rupiah’s strengthening reflects the resilience of Indonesia’s economic fundamentals amid various global uncertainties. Yet, this movement cannot yet be used as an indicator that market confidence has returned permanently.
"The recent strengthening of the rupiah exchange rate is a positive signal reflecting the resilience of the national economic fundamentals amidst global turmoil, but it is certainly still too early to conclude that market confidence has fully recovered permanently," Sutopo said when contacted on Wednesday (17/6).
According to him, the rupiah’s strengthening is largely supported by a combination of consistent government and monetary authority policies, foreign capital inflows, and market expectations regarding future economic policy stability.
"The strengthening is largely driven by a combination of consistent policy interventions, foreign capital flows, and market anticipation of future fiscal and monetary policy stability," he explained.
Sutopo assessed that the government’s credibility in the eyes of investors will be heavily determined by its ability to maintain long-term policy sustainability, particularly regarding fiscal discipline and inflation control.
"The government’s credibility will heavily depend on the sustainability of these policies in the long term—specifically fiscal efficiency and resilience against inflation—so investors tend to remain in a ‘wait and see’ stance to ascertain whether this strengthening trend is rooted in a solid economic structure or merely a temporary reaction to market sentiment," he clarified.
On the other hand, the strengthening of the stock market is also seen as receiving a boost from various stabilisation measures taken by the government and market players. One of these is the share buyback action by state-owned enterprise (BUMN) issuers, which successfully eased selling pressure in the market.
He added that the easing of geopolitical tensions in the Middle East following a peace agreement between the US and Iran also provided positive sentiment for global financial markets, including Indonesia.
"The easing of geopolitical tensions in the Middle East after the US-Iran peace deal provides fresh air for the Indonesian capital market, especially because the decline in global crude oil prices can ease inflationary pressures and increase interest in risky assets," he added.
According to Sutopo, as long as global geopolitical conditions remain stable and domestic economic fundamentals are maintained, the Indonesian stock market still has room to continue its strengthening trend.
"If geopolitical conditions remain stable and macroeconomic fundamentals are maintained, the IHSG has significant potential to continue its strengthening trend towards a higher normal level, although investors still need to be wary of external volatility that can at any time affect capital flow sentiment in emerging markets," he concluded.