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TEMPO.CO, Jakarta - The IDX Composite (IHSG) plunged 5 percent before closing at minus 6.076 points on Tuesday, March 18, forcing the Indonesia Stock Exchange (IDX) to halt stock trading for 30 minutes.
The pressure today seems to bring back memories of some of the worst economic shocks in Indonesia: the 1998 monetary crisis and the Covid-19 pandemic. So, how do they compare?
The 1998 Monetary Crisis
Citing the International Monetary Fund, Indonesia’s economic growth fell by 13 percent, triggered by a Thai exchange rate crisis that occurred early in the previous year. The magnitude of this crisis led to the downfall of the country’s 2nd President, Soeharto.
At that time, the level of confidence plunged to zero, which affected the stability of the rupiah. In 1997, the exchange rate of the rupiah against the US dollar was at the level of Rp4,850 before plummeting to Rp17,000 in May 1998. This caused investment to weaken, and the IHSG plunged by 398.04 points.
The Covid-19 Pandemic
The market was on a steady decline before former Indonesian President Joko Widodo announced the presence of SARS-CoV-2—a new type of corona virus, later taking the world by storm and notoriously known as the COVID-19 pandemic—in the country on March 20, 2020.
In response to the news of Indonesian citizens testing positive for COVID-19, the capital market experienced fluctuations. At that time, the IDX, as the stock market policyholder, immediately banned market players from engaging in short selling practices.
Short selling is the act of selling shares without owning the shares of the company first. The IDX hoped that when stock prices were weakening, with the absence of short selling, the market could be more stable.
In mid-March 2020, the IHSG plummeted by 6.58 percent. The IDX stated that this was the deepest daily decline in the past 8.5 years, where the IHSG corrected to a position of 18.46 percent year-to-date (ytd).
Then, the IDX decided to halt trading for 30 percent if the IHSG freefalls more than 5 percent, carries out asymmetric auto rejection or asymmetry between the upper auto rejection limit (ARA) and the lower auto rejection limit, as well as shortening the stock trading hours.
The index was relatively stable in May, before finally strengthening to nearly 5,000 in June in line with the relaxation of Large-Scale Social Restrictions (PSBB) policies. Entering July 2020, stock trading reached the level of 5,100 and continued to rise to 5,200 in August. However, the IHSG fell back to the level of 4,900 in September after the government re-imposed strict PSBB.
IDX Composite 2025
Chairperson of the Indonesia Stock Exchange (IDX), Iman Rachman, has explained that the sharp decline in the Composite Stock Price Index (IHSG) was attributed to both internal and external factors. While acknowledging the substantial drop in the IHSG as unusual, he urged the market to consider the broader context.
"There are several global factors contributing, including global economic uncertainty. Currently, many investors are still in a 'wait and see' mode," said Iman during a press conference held at the IDX Building in South Jakarta on Tuesday, March 18, 2025.
He did not deny that domestic factors also played a role in the significant decrease in the IHSG. However, Iman refrained from specifically detailing whether the decline stemmed from government policies, such as the directive for state-owned banks to finance 3 million housing units or other related initiatives.
Meanwhile, Associate Director of Pilarmas Investindo Sekuritas, Maximilianus Nicodemus, said that various global sentiments have triggered the IHSG tumble. The state deficit by 30 percent in early 2025 also requires larger debt issuance and a weaker rupiah.
According to Nico, this situation has also made difficult the reduction in Bank Indonesia’s benchmark interest rates. Tax revenue earlier this year also dropped by 30 percent, with only Rp269 trillion.
"Everyone is concerned that fiscal risks are increasing, causing many market players and investors to eventually shift to other much safer investments, providing certainty of returns. Thus, stocks become less attractive, and perhaps bonds become the choice after stocks," said Nico.
Aisha Shaidra and Dinda Shabrina contributed to the writing of this article.
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