Seven Pressing Concerns That Could Rattle Indonesia This Week
Indonesian financial markets are expected to remain volatile this week. Investors will be closely monitoring the sustainability of the recent rally in the Composite Stock Price Index (IHSG) and the rupiah, the direction of the US dollar, and evolving global and domestic sentiment.
The IHSG surged on Friday, driven by a strong rebound in major banking stocks. The index closed up 67.32 points, or 1.1%, at 6,173.53. Market activity was robust, with total transaction value reaching Rp16.32 trillion, significantly higher than the recent average of around Rp10 trillion. The rally was led by big-cap banks, with PT Bank Central Asia Tbk (BBCA), PT Bank Rakyat Indonesia (Persero) Tbk (BBRI), PT Bank Mandiri (Persero) Tbk (BMRI), and PT Bank Negara Indonesia (Persero) Tbk (BBNI) collectively contributing 54.7 points to the index’s gain.
Analyst Elandry Pratama from Panin Sekuritas attributed the banking sector’s strength to a technical rebound following significant prior pressure, prompting investors to accumulate stocks with strong fundamentals and high liquidity. The rally was also supported by a more limited foreign capital outflow, with foreign investors recording a net buy of Rp638.57 billion on Friday.
The rupiah also strengthened sharply against the US dollar, closing higher after consistently trading in the green throughout Friday’s session. The currency’s appreciation was in line with a weakening greenback, which fell after lower-than-expected US inflation data eased market fears of an imminent interest rate hike by the Federal Reserve. While the US economy remains relatively strong, economists expect the Fed to hold rates steady at its upcoming meeting. The CME FedWatch Tool showed the probability of a July rate hike falling to 11% from 25% a week earlier.
However, pressure is mounting from Wall Street, where major indices posted weekly losses. The S&P 500 fell 1.01% on Friday, the Nasdaq Composite dropped 1.4%, and the Dow Jones Industrial Average declined 0.77%. The technology sector, particularly semiconductor stocks, was the biggest drag. The VanEck Semiconductor ETF recorded its third weekly decline in four weeks, falling nearly 9% for the week. The sell-off was triggered by Chinese AI startup Moonshot AI unveiling a new model that reportedly rivals leading US offerings, sparking concerns about the sustainability of massive technology spending. Analysts noted that the market is showing signs of ‘AI fatigue’, with investors becoming more sensitive to costs and punishing companies with aggressive spending plans. Adding to the negative sentiment, Netflix shares fell over 7% after its future projections failed to alleviate concerns about slowing growth.