May 14, 2025
Drifting Through Geopolitical Tension

Market Commentary
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Recent escalation between India and Pakistan has entered a fragile phase of de-escalation following a U.S.-brokered ceasefire. However, the situation remains tense, with both nations maintaining heightened alertness along the border.

India launched missile strikes targeting nine sites associated groups like Lashkar-e-Taiba and Jaish-e-Mohammed in Pakistan and Pakistan-administered Kashmir. 

Pakistan retaliated with Operation Bunyan-un-Marsoos, targeting Indian military bases. The conflict saw the first drone battles between the two nations, with both sides accusing each other of airspace violations.
 
Source: The Guardian

Global markets responded with caution, and crude oil prices edged upward amid concerns that the conflict could disrupt key shipping routes near the Arabian Sea. Heightened geopolitical risk in the region also threatens to deter investment in India temporarily, particularly in sensitive sectors like infrastructure, defense, and manufacturing.

Brent Crude Oil Price Chart


Yet, amid this volatility, new opportunities are emerging elsewhere—particularly in Southeast Asia. Indonesia, with its growing trade surplus which help to strengthen the Rupiah, is positioned to benefit from a strategic shift in capital. As investors seek to diversify their exposure away from India without abandoning the broader emerging markets thesis, Indonesia offers a compelling alternative. Now, with India momentarily distracted by conflict, Indonesia could see a spillover of investment.
 
Indonesia Balance of Trade

In this way, while the India-Pakistan tension poses a near-term risk to global stability, it may also accelerate a rebalancing of investment flows within Asia—creating both challenges and opportunities for the region.
 
Sensex Index Performance


Amidst these mixed signals of global and domestic economic outlook, we suggest investors to remain invested in stocks with strong fundamentals and ample liquidity to prepare should things worsen. In our view, big banks are the example of a sound investment for current situation.

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