JCI Saw Sharp Sell-off, Followed by Dip Buying
Markets pulled back yesterday. Here's what it means for you.
Pressure in JCI Driven by Global & Domestic Factors
Yesterday, the Jakarta Composite Index (JCI) saw a sharp sell-off intraday, falling by nearly -3% during the second trading session before recovering as investors stepped in to “buy the dip.” The index ultimately closed out the day lower by -0.58%. The top lagging industries were Infrastructure (-2.37%), Technology (-1.68%), and Energy (-1.39%). The weakness was largely driven by momentum stocks. While several blue-chip names such as BBCA (-1.23%) also declined, the IDX30 managed to close slightly higher by +0.28%. Despite the sell-off, foreign investors were net buyers of ~IDR 205B. Meanwhile, the USD/IDR weakened to around 16,874.
Globally, negative sentiment increased amid rising geopolitical uncertainty, particularly following escalating U.S. tensions with Venezuela and Iran. Against the backdrop of heightened conflict involving oil-producing countries, crude oil prices moved higher, with WTI closing at USD $59.83 per barrel on Monday. The recent announcement of a criminal investigation into Fed Chair Jerome Powell further weighed on risk sentiment. These global headlines prompted investors to adopt a risk-off behaviour, triggering volatility and capital outflows across emerging markets, including Indonesia. Instead, investors rushed to safe haven assets, with gold surging to a fresh record high of USD $4,630/oz and silver again breaking a record high and reaching USD $86/oz.
Domestically, market speculation was fueled by a foreign broker’s headline suggesting that Indonesia’s fiscal deficit could exceed 3% this year, following the announcement that last year’s deficit came in higher than expected at 2.9%. While many market participants view this projection as unrealistic, the MoF and President Prabowo have indicated openness toward widening the 3% deficit cap several times last year. In addition, investors likely engaged in profit-taking after the recent JCI rally, as well as ahead of the MSCI rebalancing announcement scheduled for February.
Simpan’s View
Following the recent strength in the JCI, we have been actively trimming our exposure to momentum stocks and de-risked, maintaining higher cash levels since December. This positioning was intentional, allowing us to deploy cash when opportunity arises. In response to the recent pullback, we saw it as an opportunity to buy the dip.
That said, we recommend investors to start rotating into our Sustainable Equity Fund. We view the current correction as healthy, especially after the JCI’s rally to record highs. Our Equity Fund contains a balanced exposure to high-quality blue-chip stocks, as well as select momentum names supported by strong liquidity and flows. Looking ahead, we will continue to closely monitor market conditions and will keep investors informed if more attractive entry points emerge.