Indonesia's financial markets entered a heightened state of alert on Monday as mass protests escalated into widespread violence.

Demonstrators, initially rallying against controversial government policies, torched police outposts, public buildings, and looted private residences across major cities, including Jakarta, Surabaya, and Bandung.

From August 29 to 31, mass protests intensified, with reports of facilities destroyed and growing unrest spreading nationwide.

Organized by university student groups and civil society alliances, the demonstrations are scheduled to continue through September 5, raising concerns about ongoing instability.

Investors, spooked by the increasingly chaotic conditions, have begun pulling out of Indonesian equities and currency positions.

The heightened uncertainty has already triggered a sell-off, with more capital outflows expected if protests persist.

According to CNBC Indonesia Research, here is the latest projection and condition of Indonesia’s financial markets, as mass protests intensify and trigger heightened volatility in stocks, the rupiah, and investor sentiment.

Indonesian Stocks and Rupiah Take a Hit

The Jakarta Composite Index (IHSG) fell 1.53% on Friday, closing at 7,830.49—below its psychological level of 8,000.

Market breadth showed 610 stocks declining, while only 122 advanced. Total transaction value stood at Rp 22.76 trillion, involving over 51 billion shares.

Blue-chip stocks were the main drag on the index. Shares of PT Bank Central Asia Tbk (BBCA) declined by 3% to Rp 8,075, erasing 17.84 index points.

Other major losers included PT Bank Rakyat Indonesia (BBRI), PT Barito Renewables Energy (BREN), PT Telkom Indonesia (TLKM), and PT Chandra Asri Pacific (TPIA).

The rupiah also weakened sharply, closing at Rp 16,485 per US dollar—a 0.89% drop and its lowest level since August 1.

In the bond market, yields on Indonesia’s 10-year government securities held steady at 6.1912%, signaling a wait-and-see attitude from investors.

Government Response and Central Bank Assurances

Despite the turmoil, the Indonesian government has described the market reaction as temporary.

“Given today’s developments, the weakening of IHSG and the Rupiah is a reasonable response, as stability is key for investors,” said Susiwijono, Secretary of the Coordinating Ministry for Economic Affairs.

Bank Indonesia has reaffirmed its commitment to maintaining currency stability. Erwin Gunawan Hutapea,

The head of the Monetary and Securities Management Department emphasized that the central bank would act to keep the rupiah aligned with fundamentals.

President Prabowo Subianto, addressing the unrest, stated that public dissent must be peaceful and lawful.

He confirmed the DPR leadership had agreed to revoke controversial allowances and suspend foreign trips.

Prabowo also instructed the police and military to “take the firmest legal action” against violent actors and looters.

Global Economic Signals Weigh on Market Sentiment

Indonesia’s domestic chaos comes at a time when global markets are also under pressure. U.S. stock indices—Dow Jones, S&P 500, and Nasdaq—closed lower on Friday, driven by weaker-than-expected job data that raised doubts over a near-term Fed rate cut.

The U.S. labor market added just 73,000 jobs in July, falling short of estimates. Unemployment ticked up to 4.2%, and job openings dropped significantly.

Investors are now closely watching whether these trends will prompt the Federal Reserve to lower interest rates at its September meeting.

Adding to concerns, China’s Caixin Manufacturing PMI fell to 49.5, signaling contraction for the second time in three months.

This raises fresh questions about global demand and regional trade outlooks that could affect Indonesia's exports.

Key Economic Data May Offer Temporary Relief

Three crucial economic indicators are set to be released on Monday and could provide some direction for Indonesia’s financial markets.

First, the August inflation rate is expected to cool, with analysts forecasting a 0.09% month-on-month increase and 2.49% year-on-year. Food prices and non-subsidized fuel have shown signs of softening.

Second, Indonesia’s Manufacturing PMI is due from S&P Global. The PMI has remained in contraction territory for four consecutive months, signaling continued stress in the industrial sector.

Lastly, the July trade balance is projected to post a surplus of around US$3.01 billion, slightly lower than the US$4.11 billion in June. However, a narrowing surplus still indicates a healthy export environment.

A press conference on market stability is scheduled at the Indonesia Stock Exchange, where officials are expected to address investor concerns amid the ongoing demonstrations and macroeconomic turbulence.

PHOTO: FREEPIK

This article was created with AI assistance.