JCI Weakened Amid Proposed Mining Royalty Hikes
Commodity sectors led the market decline as investors reacted to recent announcement regarding proposed mining royalty hikes.
Dear Clients,
The Jakarta Composite Index (JCI) traded relatively flat last week, ending the week marginally lower by -0.28%. Market sentiment remained fairly stable during the first few trading days, before weakening sharply on Friday, when the index declined by -2.86%.
The sell-off was primarily driven by news regarding a new proposal from the Ministry of Energy and Mineral Resources regarding a proposed revision to Government Regulation (PP) No. 19 of 2025 to increase royalty tariffs for commodity producers (copper, gold, tin, and nickel ore), with rates of up to 20%. The government stated that the proposed adjustment is intended to better align with prevailing commodity price dynamics, ensuring the country benefits from its natural resources, especially given elevated commodity prices. At the same time, the proposal is also part of broader efforts to strengthen state revenues amid widening fiscal pressures, rising energy subsidy requirements, and other government programs such as the MBG (Free Nutritious Meal) initiative.
Following the announcement, commodity-related sectors experienced significant selling pressure. The Energy sector was among the weakest performers, declining -5.7% WoW, while the Basic Materials sector fell -5.6% WoW. Foreign investors were net sellers of approximately ~IDR 0.49T on Friday alone, with selling concentrated in commodity-linked names such as BUMI, TINS, and BREN.
However, earlier today, the Energy and Mineral Resources Minister Bahlil Lahadalia announced in a press conference that the implementation of the new regulation would be delayed. He also noted that the royalty calculation formula will be changed, with the government aiming to reach a more balanced “win-win” framework for both the state and business sectors. In addition, the government remains open to further input from the mining sector regarding the proposed royalty structure. The JCI saw a slight decline of -0.92% today.
How Did Our Funds Perform?
In line with broader market weakness, our equity-oriented portfolios were also affected, particularly given our exposure to several commodity-related holdings. On Friday, our Sustainable Equity Fund declined by -3.31%, with names such as AMMN, EMAS, and AADI being top laggards. Our Balanced Fund (-1.75%) and Amanah Syariah Fund (-1.87%) also saw declines but still outperformed the JCI, supported by their fixed income allocations which helped cushion market volatility.
What Is Our Outlook Going Forward?
We view the recent correction largely as a “panic sell on news” reaction rather than the start of a structural downturn. While near-term volatility may persist, we do not expect selling pressure to continue at the same magnitude. From a technical perspective, we believe the index is currently trading at support levels, with the ~6,500 level representing the next key support level should weakness continue.
We believe that commodity-related companies remain well-positioned in inflationary environments, particularly given that ongoing geopolitical tensions continue to support elevated commodity prices. Even if the war de-escalates, the broader implications (supply chains, inflation) are likely to persist over the medium term.
While our portfolios contain selective exposure to commodity-related names, they are also well-diversified across sectors and contain high-quality blue-chip companies with resilient fundamentals and strong earnings visibility. Beyond commodities, our portfolios also maintain exposure to sectors such as banking and telecommunications.
As always, we remain committed to managing your investments with prudence and discipline. We will continue to monitor developments closely and keep you updated accordingly.