IHSG Strengthens Despite Investor Caution: A Glimpse into Market Dynamics

The Indonesian Composite Index (IHSG) displayed resilience in the first trading session on Wednesday (28/2/2024), despite investors adopting a cautious "wait and see" approach. By 12:00 WIB, the IHSG strengthened by 0.36% to reach 7,311.24, successfully surpassing the psychological level of 7,300 after hovering around 7,200 in recent days.

Transaction value of the index during the first trading session today reached approximately Rp 45.4 trillion, involving the exchange of 14 billion shares for 771,162 times.

Several stocks served as key drivers (movers) of the IHSG in the first session today. Here are the stocks that contributed significantly to the IHSG movement:

Renewable energy company owned by conglomerate Prajogo Pangestu, PT Barito Renewables Energy Tbk (BREN), emerged as the largest contributor to the IHSG in the first session today, contributing 18.5 index points.

Despite lingering market caution awaiting the release of the latest economic data from Indonesia and the United States, the IHSG managed to strengthen in the first session today.

From the U.S., second estimate data for fourth-quarter 2023 economic growth or Gross Domestic Product (GDP) will be released today.

Market consensus on Trading Economics predicts that U.S. GDP in the second estimate on a quarterly basis (quarter-to-quarter/qtq) will reach 3.3%, lower than the third-quarter 2023 position of 4.9%.

Previously, U.S. consumer confidence data showed a decrease to 106.7 in February 2024, from 110.9 in January, below market expectations of 115.1.

The above facts reflect a slowdown in the U.S. economy that could impact the policy of the U.S. central bank, The Federal Reserve (The Fed).

If the U.S. economy continues to weaken, there is hope that The Fed will cut interest rates in the near future. This condition will benefit the Indonesian rupiah as investors may sell U.S. dollars and buy other instruments such as the rupiah.

On the other hand, investors are also weighing the draft of the State Revenue and Expenditure Budget (APBN) 2025.

President Joko Widodo's government has set a deficit target for the 2025 APBN at 2.48%-2.8%. This deficit figure is wider than the one set for the 2024 APBN at 2.29%. As known, the 2025 APBN will serve as a guideline for the next president. Based on real count data from the General Election Commission (KPU), the APBN will be used by Prabowo Subianto.

The widening deficit is accompanied by a 2025 economic growth target of 5.3%-5.6%. This is higher than the 2024 growth target of 5.2% and the 2023 economic growth realization of 5.05%.

Failure to manage the widening deficit could significantly impact confidence in the domestic financial market.

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