articlemostwanted - News of the horrible plunge in IHSG stocks has been increasing significantly across Indonesia's financial sector and happened to become a trending topic in X. Major news companies such as Kompas, TV One, and Metro TV have been providing the story in detail these past seven days, and you might want to check them for better coverage. What you'll find here is a concise summary based on my independent small research which will not be too detailed nor overly simplified.
In case you got confused on what exactly is IHSG, IHSG stands for the Indeks Harga Saham Gabungan, or the Composite Stock Price Index. It functions as a benchmark for Indonesia’s stock market condition, consisting of all shares listed on the Indonesia Stock Exchange (IDX). fundamentally, it replicates the overall health and trends of the market, making it an important indicator for investors and economists alike to decide whether it’s profitable or not.
As of now, IHSG has been in sharp decline, plummeting by 6.12% to close at 6,076.08, a drop that managed to lead to temporary trading halt due to a 5% decrease, a decrease that signals great danger. Public reactions are of course surging into panic, along with individual investors worried about their portfolios and analysts questioning the stability of Indonesia’s economic policies.
This leads us to bigger questions, such as What triggered such a horrendous event? What domino effects will it create for the people, the government, and businesses? And, perhaps most importantly, is there a way to reverse the damage and turn the market to green back like it was? Or has Indonesia met its economic doom?
The cause of such great decline is made of several build up events over these past days, since Prabowo's administration reign in Indonesia. The bottling up eventually led to a sudden explosion that has always been neglected by the government. Here are key points of what leads the market to crash:
- March 17, 2025: Reduction in Credit Rating
Indonesia's credit rating has been lowered by leading credit rating agencies, such as Fitch, S&P, and Moody's. Concerns over fiscal policy, decreasing tax receipts, and mistrust of the government's economic management were the main factors of such a decision. Investors were not confident enough due to the market decline news, forcing them to withdraw their assets. - March 18, 2025: IHSG Plummets and Trading Halt
On this day, the IHSG experienced a crazy drop of 6.12%, closing at 6,076.08. The decline was so severe that it triggered a temporary trading halt on the Indonesia Stock Exchange (IDX). Officially, this is worse than the decline when it was COVID-19 era. - March 19, 2025: Public Doubts on Economic Policies
Growing public and investor mistrust of the government's economic policies has been observed by analysts and organizations such as the Center of Economic and Law Studies (Celios). The increasing military involvement in non-military activities, such as the development of food estates in Papua and the Nutritious Free Meal program, provoked scrutiny. These policies were perceived to be inconsistent with economic priorities, further undermining trust. - March 20, 2025: Foreign Investor Outflows
A substantial percentage of Indonesia's stock market participants are foreign investors, who reported net sales of trillions of rupiah. Fears about unstable economies and doubts about the government's capacity to handle its fiscal problems were among the primary factors of this capital outflow. No one wants to spend in a place where you can’t even rest assured. - March 21, 2025: Skepticism Over Danantara Investment Management
The establishment of the National Strategic Investment Agency (BPI Danantara) fueled more negative questions about its capacity to manage state assets effectively. This agency is made independently from the Corruption Eradication Commision (KPK), which means they have no access to the cash flow (If corruption happens it will go untouched). To make it worse, the board of this agency is almost all made up of nepotism, which further increase the distrust.
The causes-in short-is by far caused by the incapability of current Indonesia's government in their fiscal policy. Nepotism is among them and of course a large portion of corruption surely will happen, based on previous news about mega corruption by Pertamina, no way people and most importantly investors have 100% confidence to put their stocks here. However, the impacts is what to be feared later, and it will hit these three targets:
- For People
People suffer the most from the IHSG decline, especially retirees and small investors who rely upon stock market gains for their savings. Daily products such as food, clothing, and housing will become more costly as purchasing power is expected to decrease due to the weakening rupiah and growing inflation. Financial insecurity is being made worse by widespread layoffs in important industries, which are leaving many people without stable salaries. The rate of unemployment soon will skyrocketed if things keep going like this. - For The Government
Pressure on the government to address the economic consequences is intensifying. In addition to harming its reputation, the economic decline raised concerns about its governance and fiscal practices. The administration must move quickly to enact remedial measures, including fiscal stimulus packages or reforms, to restore investor confidence while public trust is diminishing. Chaos in politics might take place if this isn't done. - For Businesses
As consumer spending declines, businesses are facing operational difficulties and lower revenues. Layoffs and the suspension of growth plans are among the cost-cutting measures that many are turning to. Businesses are in danger as a result of foreign investors withdrawing their funds, thus constraining access to funding.
Those explanations mentioned above might be difficult to understand for some people, especially commoners who have no familiarity with such topics. Therefore, I provide you a daily example to ease our comprehension (more like, a very simple scenario).
The Stock Market Crash in Village Terms:
Paimo has a really busy street food stall. Lots of neighbors, and even sellers from outside the village, leave their goods to be sold at Paimo’s stall.
As the business grows, Paimo hires more employees. He also takes a loan from the bank to expand his stall.
Unfortunately, Paimo makes some bad decisions. His bank loan becomes too big. One of his employees, who is also his relative, often takes goods without paying and steals money. Even though he gets caught multiple times, Paimo lets it slide because he feels bad for him.
Some of Paimo’s employees also have side jobs as thugs. They often get into fights with customers. Whenever his family tells him to manage the stall properly and discipline his employees, Paimo just gets mad and yells, "Mind your own business!"
Eventually, many sellers stop leaving their goods at Paimo’s stall. They’re afraid they won’t get their money back because of the messy management. Plus, if they try to collect their money, they have to deal with the thug employees.
Customers also start avoiding Paimo’s stall. They prefer to go to other stalls, even if they are farther away, because there’s no risk of fights and there are more food options.
In conclusion, Indonesia is now heading to its economic doom, and what astonishing is that the government doesn't even know what they’re doing. Unless there is someone who’s rational enough and brave enough to step up and take the lead, there is no saving from this.
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