Challenging and confusing—these two words may best describe our recent experiences with the stock market.

Investors utilize the Composite Stock Price Index (IHSG) to gain a comprehensive understanding of the market conditions at a specific point in time. A favorable index level indicates positive conditions across the majority of sectors.

In 2025, we agree that IHSG is facing a hard time that might make investors feel confused and full of questions about what has actually happened and will happen in the near future. Are we really seeing a crisis and recession unfolding before our eyes?

Volatility since Q4 2024

The data indicate that the stock price has sharply declined since the presidential inauguration on 21 October 2024. On that day, the stock closed at 7,772.60 IDR, but recently, on 27 March, the closing price was 6,510.62 IDR, representing a decrease of 20%.

If we see the graph above, we acknowledge that the fluctuation trend is more likely to plummet. We will share the recent volatility we experienced in IHSG.

In early 2025, IHSG noted a depression at a certain level and more foreign investors exiting the market. Within the first weeks of March 2025, IHSG plunged 0.57% or 37.78 points to 6,598.21 (10 March 2025).

The primary reason for the decline in the situation is attributed to the instability of Indonesia's political environment. This instability has led to an increasing number of foreign investors engaging in net selling, which in turn has contributed to a downturn in Indonesia's stock market within the Asia Pacific region.

According to BEI data, foreign investors had done net sell amounting to 2,3 trillion IDR in the market (until 21 March 2025). Accumulatively, from the early year of 2025, foreign investors' net sell have already reached the amount of 33,18 trillion IDR. *when this article is written.

On a yearly basis, IHSG has gone to -10.10%, making it the worst-performing composite stock price among other countries, such as Arab -6.10%, Japan -7.06%, Thailand -10%, and Filipina -9.28%.

On 18 March 2025, the Indonesia Stock Exchange (IHSG) experienced a significant decline, sparking panic among investors. The index opened at 6,472 but plummeted by 6.12% to close at 6,076 by the end of the first trading session.

All sectors faced corrections, with the hardest hit being technology, which dropped by 9.77%, followed by basic materials dropped by 5.99% and economy by 4.92%.

In response to the drastic market movements, the Indonesia Stock Exchange (IDX/BEI, Bursa Efek Indonesia) implemented a trading halt at 11:19:31 WIB (Jakarta Automated Trading System), pausing trade for approximately 30 minutes.

What is the cause?

There are several reasons contributing to the challenges that IHSG is currently facing. The primary issue is the economic instability in Indonesia following the recent presidential transition. Most financial and economic analysts agree that the root causes are more local than global.

If we can list down some reasons that we got from various sources, that will be:

1. Danantara is the sovereign wealth fund launched by Prabowo for Indonesia. The government plans to consolidate stocks from state-owned companies into Danantara to use these assets for funding critical development projects in the country. However, many Indonesians are skeptical about this initiative, fearing that it may lead to increased corruption and collusion within the institutions. As a result, the future of Danantara and its management remains a significant concern for much of Indonesian society
2. the IDR currency weakened by 5.2% against the USD, moving from 15,718 IDR to 16,532 IDR year-over-year in March 2025. This will impact the major companies that run export and import in their supply chain
3. the purchasing power of the Indonesian people has declined as imported goods become more expensive due to the weak currency of the IDR
4. the deficit of the APBN (state budget) has reached 31.2 trillion IDR, primarily due to a decline in tax revenue, which fell by 30.19% over the year to only 269 trillion IDR. This shortfall may necessitate the government to incur additional debt, which has already increased by approximately 44.77% as of January 2025. As a result, it will be more challenging for Bank Indonesia to lower interest rates, despite the fact that a decrease is essential to stimulate consumer spending. Additionally, economic instability has forced many large companies to lay off employees. There are also rumors that Sri Mulyani, our Finance Minister, may be leaving her position in the cabinet
5. credit rating downgrade from several institutions for Indonesia stock rate, such as Fitch, S&P, Moody's, Morgan Stanley (from equal weight to underweight), and Goldman Sachs (from overweight to market weight)
6. political tension and worries about recession in the USA, including the impact of trade and tariff war between USA, China, and UNI Europe, as well as the Fed decision to delay the interest decrease.
7. recently on 2 April 2025 (USA timezone), Trump released a new policy about trade tariffs that can trigger a global trade war. Trump gives 32% tariff for Indonesia and it’s even bigger than India (because Indonesia is part of China’s supply chain). This surely will have a big impact on our export business to America.

As an investor, how do we respond to this?

The IHSG conditions might be more caused by macroeconomic circumstances that are out of our control. As we always say and remind, focus only on what we can control. Moreover, bear in mind these three pearls of wisdom.

1. assess your investment
Through THINK Tank, we have taught our members "Timeless Investment Principles" about how to acknowledge and manage the risks coming from their investments. There are three types of Investment Risk: Business Risk (company and business side), Premium Risk (pricing and valuation side), and self risk (personal side). Assess the business and whether it is affected or changed significantly regarding the macroeconomic condition. If it is not and the stock price even very cheap, why do you have to be afraid to buy it?

2. aware of what is important and knowable
We always remind you about the concepts of your inner scorecard and circle of competence. Focusing on the micro aspects is important—those things you know best and surely can control. You should be more engaged in the businesses where you hold shares and in which you are interested in investing.

Global conditions, such as trade and tariff wars, geopolitical tensions, local government instability, and currency fluctuations, are beyond our control. Therefore, while you need to monitor these factors, your focus should be on identifying alternative scenarios that can be applied within your "controllable" areas.

Take Danantara as an example. It represents a strong strategy that could significantly impact the national economy, much like Temasek does for Singapore. However, the negative sentiments surrounding potential issues such as corruption, collusion, or misallocated funding are factors beyond our control.

Another example is the recent weakening of the IDR currency. As an investor, you can prepare for this by focusing on companies that sell goods in USD, as they currently benefit from the situation. It's best to avoid businesses that purchase basic materials in USD from overseas.

When foreign investors exit the market by doing net sell for trillions of IDR, as investors, we don’t need to assess why they are doing that. It will be more like a guessing game that gives no value at all. In the end, what really matters is the business itself. That’s the area you have to zoom in.

3. at the end, you'll realize there is no absolute 100%, so invest with MOS

You won't know everything, nor will you be able to control everything. However, during a crisis, the potential for finding a good investment actually increases. In such situations, it's vital to build strong conviction by conducting thorough research and ensuring you invest with a sufficient Margin of Safety/MOS.

No matter how smart and excellent you are in researching and analyzing the business, there will always be things that you can’t control, but they affect the business significantly. Let's say the tariffs, the exchange currency fluctuations, the changing of government policy, or the interest rate that can affect the banking business.

Patience and sensitivity will be your greatest assets in this situation. Savvy investors can identify opportunities even amid a crisis. During the difficult times of the IHSG, it's essential to trust your instincts to uncover chances to purchase solid businesses, especially when their prices are heavily affected by the downturn.

When you are about to buy the stock, you must have a bold margin of safety that will give you room for error. MOS helps you stay stable and still get a return even when the macro situation gets worse and affects the business or even if you miscalculate when analyzing. It is because you buy the company shares at a good discount.

Remember to stay in your conviction by doing deep-dive research on several listed companies. Do the homework by utilizing tools, learning material, and a bank of archives from THINK. Who knows, you may find fallen giants in this situation that will bring you considerable fortune in the long term.

Again, you must always rely on the margin of safety. Buying a good business at a price beyond its fair value is not considered a good decision. But buying a basic business at a price below its fair value is considered a good decision. 

“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price – Warren Buffet –

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