Why Indonesia's Stock Market Plunged Today: Analysts Point to Economic Growth Concerns and "Trumponomics"

JAKARTA, investortrust.id – Indonesia's benchmark stock index took a significant hit on Thursday, Feb 6, 2025, falling sharply and contrasting with the positive performance of other Asian markets.

The Jakarta Composite Index (JCI) at one point plummeted by 190 points (2.72%) to 6,834, though it ultimately closed down 148.69 points (2.12%) at 6,875. Analysts attribute the steep decline to several factors, primarily investor concerns about slowing economic growth, combined with the potential impact of "Trumponomics" and a weakening Rupiah.

Hendra Wardana, a market analyst and founder of Stocknow.id, believes the market reacted negatively to the recently released 2024 Gross Domestic Product (GDP) data, which showed a growth rate of 5.03%. This figure is lower than the 5.05% growth in 2023 and significantly below the 5.31% achieved in 2022.

"This data triggered negative sentiment in the stock market, especially as the trend of economic slowdown is becoming apparent amidst various global pressures and domestic policies that have the potential to hinder future growth," Hendra told Investortrust.id on Thursday.

Hendra pointed to the government's budget efficiency measures, outlined in Presidential Instruction No. 1/2025, which aim to cut spending by Rp 306 trillion ($19.3 billion), as another source of investor anxiety.

Government consumption is a major driver of economic growth, and these cuts raise concerns about a further slowdown. "Investors are increasingly worried that this policy, although aimed at maintaining fiscal stability, will actually impact people's purchasing power and investment in the real sector," Hendra explained.

Senior Market Analyst at Mirae Asset Sekuritas Indonesia, Muhammad Nafan Aji Gusta, echoed this sentiment, linking the index's decline to stagnant Indonesian economic growth in 2024 and the potential effects of "Trumponomics" – the economic policies enacted by Donald Trump during his U.S. presidency.

Nafan also highlighted the weakening of the Rupiah against the US dollar as a contributing factor. "I see that the performance of the Rupiah exchange rate has weakened against the US dollar in connection with the Trumponomics policies that have been set," Nafan explained on Thursday.

Domestic Economic Data and Manufacturing

Looking at domestic economic data, Nafan pointed out that Indonesia's 2024 GDP growth of 5.03% was stagnant and below the government's target of 5.2%, although it was slightly higher than the 5% projected by the IMF and World Bank in their January 2025 outlooks.

"We see that Indonesia's economic growth is indeed relatively stagnant, because there is also stagnation in the performance of household consumption," Nafan said. "Then the performance of the manufacturing industry is also underwhelming, in connection with the trend of contraction in the Indonesian Manufacturing PMI."

Indonesia's Purchasing Managers' Index (PMI), a measure of manufacturing activity, remained below 50 (indicating contraction) until November 2024. It has since risen above 50 in December 2024 and January 2025, signaling a return to expansion.

Furthermore, Nafan observed that Indonesia's export growth was lower than import growth. "So it is natural that our economic growth performance was relatively stagnant in 2024," he said. "We were only helped by increased government spending at that time, because of the dynamics of the election."

Nafan calculated that even if Indonesia achieved 5.2% economic growth, the government would still face significant challenges in boosting it further, especially towards the ambitious 8% target. "The implementation of Trumponomics 2.0 has also caused our JCI in particular to experience capital outflow," he said. "Coupled with the bond market which also experienced outflows." Consequently, Nafan believes it's understandable that the Rupiah has depreciated due to these factors.

He added that market participants are also awaiting the announcement of US nonfarm payroll data, which could influence the Federal Reserve's decision on interest rates and impact the movement of the US dollar.

Bank Stocks Drag Down Index

Hendra noted that the index's decline was further exacerbated by selling pressure on bank stocks, particularly those of major banks, following the release of fourth-quarter 2024 performance reports showing a slowdown in quarter-on-quarter (QoQ) profit growth. Bank Central Asia (BCA) recorded year-on-year (YoY) profit growth of 12.7%, but a QoQ decline of -3.1%.

Bank Negara Indonesia (BNI) grew by only 2.7% YoY, but fell by 8% QoQ. Bank Mandiri faced even greater pressure, with profit growth of only 1.3% YoY and a decline of 11% QoQ.

The market is still awaiting earnings data from Bank Rakyat Indonesia (BRI), but Hendra said the market has already reacted negatively, anticipating a similar trend to the other three banks.

The sharp correction in bank stocks was unavoidable because the sector has a large weighting in the JCI, causing selling pressure to deepen and drag the index down more sharply than regional exchanges. "Ironically, while the JCI was under pressure, stock indexes in Asia actually moved higher," Hendra said.

Outlook and Stock Recommendations

Given these conditions, Hendra believes that the pressure on the JCI is unlikely to be over and could potentially continue for the next few days, especially if there are no positive catalysts to offset negative domestic sentiment. "However, a reversal could occur if investors see that the correction has been deep enough and start looking for stocks with attractive valuations," he said.

According to Hendra, some stocks that are still worth considering amid market pressure include Surya Citra Media (SCMA) with a target price of Rp 199, Ace Hardware Indonesia (ACES) with a target of Rp 830, and Bank Syariah Indonesia (BRIS) with a target of Rp 3,130. 

"Investors are advised to remain cautious in making short-term investment decisions, while observing global developments and the direction of domestic economic policies, which could be the main determinants of the JCI's future movement," he said.