Indonesia's Post-Protest Economic Rebound: Equity Market Resilience and Earnings Outperformance

The August 2025 protests in Indonesia, driven by public frustration over economic inequality, excessive parliamentary allowances, and police violence, initially triggered significant market volatility. However, the Indonesian equity market has demonstrated surprising resilience, with the Jakarta Composite Index (JCI) rebounding from a 3.6% single-day drop to a 4.69% monthly gain by September 4, 2025 [1]. This rebound, coupled with strong commodity prices and stable macroeconomic fundamentals, raises critical questions about the market’s ability to outperform amid political uncertainty.

Equity Market Resilience: A Tale of Two Sectors

The JCI’s recovery underscores the divergent performances of Indonesia’s key economic sectors. While the manufacturing sector faced headwinds—losing 42,000 jobs in the first half of 2025 and grappling with U.S. import tariffs on apparel and footwear—the resource sector remained largely unscathed [2]. Coal, nickel, and palm oil producers continued operations without disruption, supported by global demand and flexible pricing policies introduced by the government [3]. For instance, the removal of benchmark pricing requirements for coal and mineral sales allowed miners to capitalize on higher margins, offsetting some of the protests’ economic drag [4].

Analysts attribute the market’s resilience to Indonesia’s robust commodity exports, which reached $24.7 billion in July–August 2025, and a stable inflation rate (consumer price index at 108.51 in August) [5]. Coordinating Minister for Economic Affairs Airlangga Hartarto emphasized that the country’s foreign exchange reserves and banking system provide a buffer against short-term shocks [6].

Earnings Outperformance: Commodity-Driven Optimism

Corporate earnings in the resource sector have outperformed expectations, with forward profit estimates for the JCI rising by over 4% post-protests [7]. This optimism is fueled by resilient domestic consumption and interest-rate cuts, which have supported household spending despite rising living costs. For example, palm oil producers benefited from strong global demand, while nickel firms navigated environmental policy shifts—such as the cancellation of mining permits in Raja Ampat—without operational halts [8].

In contrast, the manufacturing sector’s earnings have lagged. The Purchasing Managers’ Index (PMI) for manufacturing stood at 47.4 in May 2025, signaling contraction, while youth unemployment and capital-intensive investment trends have weakened labor-intensive industries [9]. However, analysts like OCBC’s Lavanya Venkateswaran maintain a 4.7% GDP growth forecast for 2025, citing the resource sector’s ability to offset manufacturing declines [10].

Government Reforms and Investor Sentiment

The Indonesian government’s response to the protests has further bolstered market confidence. Reversals of controversial policies—such as the $3,000 monthly housing allowance for lawmakers—and pledges to investigate police misconduct have signaled a shift toward accountability [11]. These measures, combined with stimulus packages for the MSME sector and loan repayment relief, have mitigated some of the protests’ economic fallout [12].

Despite these steps, structural challenges persist. Rising property taxes, austerity measures, and political tensions within the ruling coalition highlight the fragility of Indonesia’s economic model. Yet, the government’s emphasis on commodity exports and infrastructure projects—such as the Free Nutritious Meal program—suggests a long-term strategy to balance social welfare with fiscal sustainability [13].

Conclusion: A Path Forward for Investors

Indonesia’s post-protest economic rebound reflects a complex interplay of resilience and vulnerability. While the equity market has shown remarkable recovery, driven by resource sector outperformance and stable macroeconomic indicators, investors must remain cautious about sector-specific risks. The manufacturing sector’s struggles and lingering public discontent underscore the need for structural reforms to address inequality and youth unemployment.

For now, Indonesia’s equity market appears well-positioned to outperform global emerging markets, supported by its commodity-driven growth and policy responsiveness. However, sustained success will depend on the government’s ability to translate short-term concessions into long-term institutional reforms.

Source:
[1] Indonesia Stock Market (JCI) - Quote - Chart - Historical Data, [https://tradingeconomics.com/indonesia/stock-market]
[2] What's Behind the Violent Protests Across Indonesia?, [https://www.bloomberg.com/news/articles/2025-09-02/indonesia-protests-why-are-people-protesting-what-is-prabowo-doing]
[3] Indonesia removes the requirement for benchmark prices to be used in mineral and coal sales, [https://energynews.oedigital.com/mining/2025/08/25/indonesia-removes-the-requirement-for-benchmark-prices-to-be-used-in-mineral-and-coal-sales]
[4] Indonesia's resource sector escapes mass protests, [https://www.argusmedia.com/ja/news-and-insights/latest-market-news/2726869-indonesia-s-resource-sector-escapes-mass-protests]
[5] Indonesia | Economic Indicators | Moody's Analytics, [https://www.economy.com/indonesia/indicators]
[6] Protests Disrupt Cities, But Indonesia's Economy Stays on Track, [https://business-indonesia.org/news/protests-disrupt-cities-but-indonesia-s-economy-stays-on-track-minister]
[7] Indonesia Protests in Rear View as Analysts Bullish on Earnings, [https://www.bloomberg.com/news/articles/2025-09-08/indonesia-protests-in-rear-view-as-analysts-bullish-on-earnings]
[8] After protests, Indonesia cancels mining permits for nickel ore in Raja Ampat, [https://energynews.oedigital.com/mineral-resources/2025/06/10/after-protests-indonesia-cancels-mining-permits-for-nickel-ore-in-raja-ampat]
[9] Indonesian protests a wake up call on policy complacency, [https://eastasiaforum.org/2025/09/08/indonesian-protests-a-wake-up-call-on-policy-complacency/]
[10] Protests rock Indonesia but OCBC keeps 2025 GDP forecast, [https://sg.finance.yahoo.com/news/protests-rock-indonesia-ocbc-keeps-014019666.html]
[11] Indonesia protests explained: why did they start and how has the government responded?, [https://www.theguardian.com/world/2025/sep/02/indonesia-protests-explained-start-how-has-the-government-responded]
[12] Financial Sector Stays Resilient as OJK Rolls Out Aid for Protest-hit Borrowers, [https://jakartaglobe.id/special-updates/financial-sector-stays-resilient-as-ojk-rolls-out-aid-for-protesthit-borrowers]
[13] Indonesian government says economic fundamentals are solid despite extended protests, [https://www.reuters.com/world/asia-pacific/indonesian-government-says-economic-fundamentals-are-solid-despite-extended-2025-09-01/]