INDONESIA’S STOCK MARKET VOLATILITY RISES AHEAD OF ELECTION YEAR

 By KUSNANDAR & CO., Attorneys at Law – Jakarta, INDONESIA

 

As Indonesia approaches its election year, the country’s stock market is once again experiencing heightened volatility, reflecting investor sensitivity to the political and policy uncertainties that often accompany leadership transitions. In recent months, the Jakarta Composite Index (JCI) has shown increased fluctuations, driven by speculation over potential presidential candidates, anticipated shifts in fiscal priorities, and the likelihood of post-election cabinet reshuffles.

 

For market participants, political uncertainty is often equated with added risk—especially when it concerns the continuity of pro-investment policies, fiscal stability, and long-term structural reforms. Institutional investors, including foreign funds, have begun rebalancing their portfolios to reduce exposure to domestic political risk. This is evident in the recent uptick in foreign outflows, particularly from sectors closely tied to government policy, such as infrastructure, energy, and banking.

 

The volatility is further compounded by external factors, including interest rate trends in the United States, commodity price movements, and concerns over economic slowdown in China—Indonesia’s key trading partner. As domestic and global pressures intersect, the market becomes increasingly vulnerable to short-term shocks, requiring investors to adopt a more cautious, fundamentals-based strategy.

 

From a legal and regulatory standpoint, this environment introduces several key considerations. Publicly listed companies are expected to maintain high standards of disclosure, avoid manipulative practices, and reinforce corporate governance to sustain investor confidence. At the same time, investors must stay informed about Indonesia’s evolving regulatory landscape, especially the potential for new policy directions under the next administration—ranging from tax reforms to foreign ownership rules and investment incentives.

 

At Kusnandar & Co., we continue to advise clients on navigating these uncertainties. For long-term investors, Indonesia’s equity market still presents significant potential, supported by relatively strong economic fundamentals and a growing middle class. However, investing during a political transition requires prudence, effective risk diversification, and agility to adapt strategies in response to shifting policy signals.

 

The capital market is a reflection of future expectations and investor sentiment. While political uncertainty is inevitable, it can be managed. With a thoughtful approach and proper legal guidance, investors can uncover opportunities amidst volatility and safeguard their portfolios from short-term disruptions.

K&Co - September 16, 2025