July 08, 2025
The Strong Bull Run

Market Commentary
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In early July 2025, Indonesia saw a wave of eight IPOs launching bookbuilding within a narrow timeframe. With investors eager to subscribe, much of their available cash was directed toward these offerings—forcing some to liquidate parts of their existing portfolios in the JCI. The result? A noticeable drop in trading volumes and thinner liquidity across the board was seen while the Middle-East tension escalates.

But now that bookbuilding is wrapping up, the moment of release is near. Capital that was tied up is starting to flow back into the market, and the JCI is poised to feel the shift.
 
JCI Performance and Transaction Volume

Meanwhile, the enactment of the Big Beautiful Bill introduces substantial tax cuts projected to widen the U.S. fiscal deficit by approximately 0.9% of GDP annually until 2034 from 2024. This development is set to reshape the trajectory of U.S. interest rates, dollar liquidity, and global capital flows. 

Amid declining foreign appetite for U.S. Treasury securities—foreign ownership has declined from 43% to 29% over the past decade—a structurally weaker U.S. dollar is increasingly emerging as the prevailing macroeconomic reality for global investors.
 
US Treasury Ownership Profile

Supported by a consistent trade surplus, fiscal deficits below 3%, and a stable macroeconomic environment, the country presents a rare combination of attractive yields, policy credibility, and sustained reform momentum. In our view, the rupiah is entering a secular appreciation cycle, driven by a global reallocation of capital away from U.S. assets.
 
Indonesia's Budget Deficit

Our economists’ base case projects the USD/IDR exchange rate to appreciate to Rp15,500 by the end of 2025, accompanied by a decline in 10-year Indonesian government bond yields to 5.8%. 

Should the 10-year Indonesian government bod yield fell to 5.8% or below, we believe Indonesia equity market is likely to follow the rally of the bond market as well. Therefore, we suggest investors to pay attention to Indonesian government bond yield as one of the leading indicator of strong Indonesian equity market outlook.

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