May 15, 2025

Green Shoots Are Here

Market Commentary

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After a turbulent journey, the JCI has finally broken past the 7,000 level again, hopefully, this time it's not just a short visit.

Looking back, we know the JCI had been struggling in recent months, even hitting trading halts twice due to sharp corrections.

In our view, this recent rebound is the result of a combination of several positive fundamentals in Indonesia. The hottest topic, of course, is the easing trade tensions between China and the U.S.

This improvement in relations was quickly welcomed by regional markets, including Indonesia.

To us, this isn’t just surface-level good news, it’s also a strategic opportunity.

With the U.S. softening its stance toward China, Indonesia could step in and push for fairer trade deals, especially regarding the 32% tariff threat from the U.S. that had previously caused concern.

The easing of this trade war also means smoother global supply chains, improved investor confidence, and broader trade opportunities.

No surprise then, big banks were immediately flooded with foreign capital. They made it into the top five stocks with the highest foreign net buy in the past two days..

This is a strong signal that foreign investors are returning to our market, with confidence gradually recovering.

When foreign funds flow into large banks, it usually marks the beginning of a wider rotation into other sectors. If Bank Indonesia indeed signals a rate cut soon, it could further fuel the ongoing rally.

And the good news doesn’t stop there, Indonesia has just been officially accepted as a full member of BRICS.

This is a major step that gives Indonesia a new platform on the global stage, especially in pushing for reform in the international financial system and strengthening cooperation within the Global South.

For our economy, joining BRICS could make cross-border transactions more flexible, including the possibility of buying oil from Russia using rupiah.

What does that mean? It could help us save on dollar reserves.

We’ve said before that one of our biggest challenges is liquidity, and this could be a concrete solution to help ease that pressure.

From a macro perspective, our foreign exchange reserves remain solid, and Bank Indonesia's policy responses have been measured.

Indonesia Foreign Exchange Reserves

With all of this, we are fairly optimistic that the rupiah has room for a sustained rebound.

As long as there are no sudden geopolitical shocks, we project the rupiah could stabilize and potentially strengthen to around IDR 15,500–16,000 in the coming months.

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