S&P Dow Jones Places Indonesia on Watchlist for Potential Downgrade as War Escalates

Indonesia’s financial market is expected to face pressure today. From the bond market, the yield on 10-year government bonds (SBN) stagnated at 7.183% in yesterday’s trading, up from 7.146% the previous day. Rising yields indicate falling SBN prices as investors sell. On Wall Street, stocks weakened on Tuesday’s trading. Indices fell as investors continued rotating out of artificial intelligence (AI)-related stocks, while oil prices continued to strengthen. The Dow Jones index fell 130.76 points, or 0.25%, after earlier hitting a new intraday record high, closing at 52,925.15. The Nasdaq Composite fell 1.16% to 25,818.69, and the S&P 500 weakened 0.45% to 7,503.85. Micron shares closed down 4.7%, followed by declines in KLA, Marvell Technology, Broadcom, and AMD. The VanEck Semiconductor ETF (SMH) fell more than 3%. “Market expectations are already very high, while company fundamentals are struggling to meet those expectations. That is what is driving today’s market weakness,” said Mike Bailey, Director of Research at FBB Capital Partners. He expects the recent sector rotation to continue. Investors are shifting funds to other sectors such as healthcare, finance, and large technology companies. Eli Lilly shares rose nearly 3%, while JPMorgan Chase and Microsoft also strengthened. Walmart shares also rose after the company announced price cuts on a number of products, including minced beef and Coca-Cola drinks. Market sentiment was also weighed down by a surge in oil prices after Iran attacked a Qatari liquefied natural gas (LNG) tanker near the Strait of Hormuz. Global benchmark Brent crude closed up 3% at US$74.16 per barrel, while US West Texas Intermediate (WTI) strengthened nearly 3% to US$70.44 per barrel. Oil prices then continued to rise after the market close following the US decision to revoke licences allowing Iranian oil sales. Pressure on AI stocks originated in the Asia-Pacific market after South Korea’s Kospi index plunged nearly 5%, triggered by a slump in memory chip maker Samsung Electronics’ shares of around 7%. Although Samsung posted a surge in second-quarter profits, concerns about spending and demand kept investors selling. The European Stoxx 600 index closed down around 0.7%. Adam Crisafulli of Vital Knowledge explained that the reaction to Samsung highlights one of the biggest market risks in the coming weeks. “Second-quarter earnings reports are likely to be quite strong in absolute terms, but unlike the first-quarter reporting season, investor expectations are now very high. This makes the bar for companies to meet much tougher,” he said. Negative sentiment was also triggered by a Reuters report citing sources that DeepSeek is developing its own AI chip. The move could reduce the company’s dependence on semiconductors from manufacturers such as Nvidia and Samsung. Meanwhile, SpaceX shares fell more than 6% on their first day in the Nasdaq-100 index. The decline occurred despite many Wall Street analysts giving positive recommendations along with optimistic price targets, including from Morgan Stanley and Raymond James. According to Bailey, the decline in SpaceX shares is an indication of a shift by investors to safer assets (risk-off), given that the company is seen as a player in the AI sector. The Indonesian financial market today is expected to be depressed by numerous negative external sentiments, including the heating up of war, the S&P Global Indices warning, and the still-strong US economy. The US military launched another attack on Iran on Tuesday and revoked licences that previously allowed Tehran to sell oil on the international market. The move came after three oil tankers were attacked in the Strait of Hormuz, further threatening a fragile ceasefire. US Central Command (CENTCOM) stated the strikes were a response to alleged ceasefire violations by Iran. Iranian media reported several explosions in Sirik, Qeshm Island, and Bandar Abbas early Wednesday, but there were no immediate reports of casualties or damage. The revocation of Iran’s oil sales licence immediately pushed global oil prices up by more than 3%. Iran condemned Washington’s decision, calling it a violation of the temporary peace agreement, and asserted it would take necessary steps to protect its national interests. At the same time, Qatar accused Iran of attacking the LNG tanker Al Rekayyat, while a Saudi-flagged oil tanker was also reported damaged off the coast of Oman. A US official said initial indications suggest Iran fired on three commercial vessels. Domestically, hundreds of thousands of people attended the funeral procession of Iran’s Supreme Leader Ayatollah Ali Khamenei in Qom, with crowds chanting for revenge against the US and President Donald Trump. Trump threatened to continue attacks if Iran does not reach a permanent deal, but Iranian Foreign Minister Abbas Araqchi stressed that negotiations would not begin as long as US military threats continue. S&P Dow Jones Indices has placed Indonesia, Turkey, and Nigeria on its 2027 watchlist for potential market reclassification.