Indonesia’s stock market is experiencing significant turmoil, with the Indonesia Stock Exchange Composite (IDX Composite) recently plummeting by 7%. This sharp drop led the Indonesia Stock Exchange (IDX) to issue a temporary trading halt.
The situation was further aggravated when global investment bank Goldman Sachs downgraded Indonesia’s financial assets, citing increased fiscal risks from several policies and initiatives under President Prabowo Subianto.
Sachs lowered Indonesia’s stock rating from overweight to market weight, which intensified foreign sell-offs in the domestic stock market.
Commenting on the market situation, UGM economist Dr. I Wayan Nuka explained that the decline of the IDX Composite reflects not only economic factors but also investors’ perceptions of national stability.
“When an index falls as dramatically as it did, it’s a reflection of what investors perceive,” he said on Monday, Mar. 24, 2025.
Dr. Nuka pointed out that net foreign sales had already surged significantly in the days before the IHSG drop.
This suggests that investors were eager to divest their assets and seek better opportunities in other countries.
“If we look at the same day’s indexes, only Indonesia was in the red in Asia, while the others were green. I suspect a shift, with funds leaving Indonesia and entering other countries in the region,” he explained.
The Head of UGM’s Management Program emphasized that the IDX Composite’s weakness is not a sudden occurrence but an accumulation of factors, ranging from controversial government policies and corruption scandals in state-owned enterprises (SOEs) to prolonged political uncertainty.
Investors see signs indicating that something is wrong with the country.
“Our deficit is widening, debt repayments are increasing, and international rating agencies have downgraded us. If even they say we’re slipping, what more can we say?” Dr. Nuka added.
Restoring Market Confidence
To address the weakened investment market, Dr. Nuka criticized political moves such as the parliament’s visit to the stock exchange, calling them superficial and ineffective.
He stressed that restoring trust is crucial in this situation.
“This is a trust issue. The only solution is for the government to show goodwill and send positive signals to the world,” Dr. Nuka said.
He also noted that regaining trust is a difficult task.
Indonesia must demonstrate economic and political stability as it competes with countries like Vietnam, Thailand, and Malaysia for investors.
Otherwise, capital outflow will continue.
“We can’t just chase investors while other countries are showing improvement,” he remarked.
Regarding what the public can do in this situation, Dr. Nuka advised a more cautious approach to investment.
He encouraged people to adopt a defensive stance and avoid being overly aggressive with their spending.
Instead, they should hold back, wait, and observe the economic situation.
He also reminded the public that layoffs are growing, and people need to be more prudent in managing their finances.
“Increase your emergency funds, practice efficiency, and prioritize essential needs. Everyone must realize that we are not in a good situation,” Dr. Nuka cautioned.
Despite the challenges, Dr. Nuka urged people to remain optimistic while hoping for government reform.
“No matter how dark things seem, we are still Indonesians. If we aren’t optimistic, who will be? However, we also hope this serves as a wake-up call for the government to avoid anti-market policies,” he concluded.
Author: Bolivia Rahmawati
Editor: Gusti Grehenson
Post-editor: Lintang
Photograph: Kontan