Asia

Lifepal: Indonesia’s IDX Composite moving towards positive trend

Indonesian flag (©Nick Agus Arya)

Indonesian flag (©Nick Agus Arya)

Indonesia’s stock exchange IDX Composite is moving towards a positive trend. It appeared to have the worst performance among other stock exchanges in its peer until July 13, 2020, according to Lifepal’s previous research.

The Indonesia-based insurance marketplace analyzed data on the movement of the stock price index of ASEAN member countries and the growth of COVID-19 cases in these countries. It did not include Brunei Darussalam, one of the sovereign countries with no stock exchange.

Prior to July 13, 2020, the IDX Composite moved at a rate of -19.46 percent, which made it the weakest stock exchange in Southeast Asia. But in relation to the newest data, it appears to be in the sixth position with a growing rate of -15.36 percent since the beginning of 2020.  

Indonesia recorded an economic growth of 2.97 percent in the first quarter of 2020, the lowest it has been since 2001. With contraction or negative growth took in the second quarter of 2020, the country is already halfway to an economic recession and if its economic growth continues to be negative in the third quarter of 2020, it will officially be entering a recession. 

The average number of COVID-19 cases in Indonesia is increasing. In March 2020, there were 59 cases per day, which increased in April 2020 to 295 cases per day, 516 cases per day in May 2020, 977 cases per day in June 2020 and 2,095 cases per day in August 2020. 

 

In Indonesia, traveling using public transportation including airplanes as well as going to a station or airport are classified as a high-risk activity to be exposed to the virus. This is according to epidemiology expert Dr. Tri Yunis Miko Wahyono, Msc of Universitas Indonesia’s Faculty of Public Health in Lifepal.co.id’s previous research regarding the risks of COVID-19 in daily activities.

To support the growth of Indonesia’s economy, Bank Indonesia also cut the benchmark interest rate by 25 basis points in order to encourage people to consume. On the other hand, the government also disbursed funds of Rp22.95 trillion with tax relaxation for businesses and employees.

However, Indonesia’s minister of state owned enterprises Erick Thohir believes that Indonesia can only achieve a 40 percent to 60 percent economic recovery until the end of 2020. It will reach a complete recovery in the first quarter of 2022.

Along with that, the average growth of COVID-19 cases in Indonesia has been increasing, which could trigger economic uncertainty in the country. There is a big possibility that this could be the reason as to why investors are reluctant to invest money in the stock market and as a result, the recovery of the IDX Composite could be slower than other ASEAN countries.

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