JCI Fell -7% This Week Amid Rising Geopolitical Uncertainty
Uncertainty around geopolitical tensions continue to drive market weakness.
Dear Clients,
Ongoing uncertainty surrounding the escalation of the US/Israel–Iran conflict continued to weigh on markets this week, with the JCI declining by -6.97%. Notably, the index fell sharply by -3.25% today, with broad-based selling across blue-chip and conglomerate stocks.
Meanwhile, Brent crude oil remains elevated at around USD $100/bbl, dampening investor sentiment as higher-for-longer energy prices raise concerns over inflation and Indonesia’s domestic fiscal policy. As a net oil importer, Indonesia is particularly exposed to rising oil prices, which may further strain fiscal conditions.
In addition to geopolitical pressures, continued Rupiah weakness has further weighed on sentiment. The currency remains near IDR 17,200/USD, surpassing levels seen during the COVID-19 pandemic. This reflects persistent “risk-off” positioning, with capital outflows from emerging markets such as Indonesia. While foreign investors recorded net outflows of approximately IDR 11.83T (as of April 24th), there were signs of selective accumulation, particularly in commodities & energy, industrials, and consumer sectors, suggesting that while overall positioning remains cautious, foreign investors are gradually rotating into preferred segments rather than exiting the market entirely. Given ongoing Rupiah weakness, BI maintained its policy rate at 4.75% during its last meeting in April, prioritizing currency stability while balancing inflation and growth. With inflation at 3.48% in March, near the upper end of BI’s 1.5% – 3.5% target range alongside continued Rupiah weakness, the central bank is likely to remain on hold for longer.
Regionally, other Asian currencies such as the Philippine Peso and South Korean Won also weakened. In addition to equities, the bond market saw pressure as well from foreign outflows, with the 10-year Indonesian Government Bond yield rising to 6.72% as of today.
Simpan’s Views
Given ongoing uncertainty around the duration and trajectory of the conflict, we expect market volatility to persist. As highlighted in our March Monthly Investor Update, a sustained shift back to “risk-on” would likely require either a clear de-escalation in the Middle East (specifically, a ceasefire driving Brent below USD $85/bbl) or stabilization in the Rupiah which in return would bring some relief to Indonesia’s fiscal spending.
Despite near-term volatility, our investment approach remains anchored in fundamentals. We continue to focus on resilient companies with solid earnings visibility, with meaningful exposure to commodity-linked sectors that are well-positioned in an inflationary environment. At the same time, we maintain selective exposure to sectors such as financials and telecommunications.
When the market pulls back, we view it as an opportunity to further add exposure on names that are on our watchlist. For investors seeking long-term capital appreciation, our Sustainable Equity Fund remains well-positioned to capture these opportunities.