Indonesia Stock Slide Resumes as New Wealth Fund Takes Shape

The Jakarta Composite Index (JCI) has been on a rollercoaster ride, with a recent slide of 4.7% on March 18, 2025, marking the biggest one-day drop in nearly a week. This volatility comes as Indonesia's new sovereign wealth fund, Danantara Indonesia, begins to take shape, transferring ownership of top state companies to its operational holding arm, PT Biro Klasifikasi Indonesia. The fund, modeled after Singapore's Temasek, aims to manage assets worth over $900 billion and drive the government's goal of achieving 8% growth within the next five years. However, the market's reaction suggests that investors are uncertain about the economic policies under President Prabowo Subianto, including the establishment of Danantara.

The transfer of state-owned enterprises (SOEs) to Danantara is part of a broader effort to create jobs and push Indonesia's economic growth. The fund will invest in sustainable high-impact projects across sectors such as renewable energy, advanced manufacturing, downstream industries, and food production. However, the recent stock market slide suggests that investors are uncertain about the economic policies under President Prabowo Subianto, including the establishment of Danantara.

The transfer of SOEs to Danantara has already caused market jitters, as seen in the recent selloff of Indonesian stocks. Investors are uncertain about the economic policies under President Prabowo Subianto, including the transfer of state firms to the sovereign wealth fund. The selloff came as the government started transferring ownership of several top state companies, such as telecommunications firm PT Telkom Indonesia and steelmaker PT Krakatau Steel, to the new sovereign wealth fund Danantara. Kok Hoong Wong, head of institutional equities sales trading at Maybank Securities, noted that "the transfer of state firms’ ownership to the sovereign wealth fund 'seemed to have continued to unsettle investors.'"

The government's plan to channel $20 billion to the wealth fund to help finance 20 strategic projects, ranging from downstream nickel to artificial intelligence, has added to the uncertainty surrounding the market. The government expected the share transfer process, which involves dozens of state firms, to complete in March 2025, but the uncertainty surrounding this process has contributed to the market volatility.

The transfer of SOEs to Danantara presents a mixed bag of opportunities and challenges. On one hand, it offers the potential for improved management, sustainable development, and job creation. On the other hand, it poses risks related to market uncertainty, governance concerns, and economic policy challenges. The long-term impact on Indonesia's economic growth and stability will depend on how effectively Danantara can navigate these risks and capitalize on the opportunities.



The recent stock market slide in Indonesia serves as a reminder of the challenges and opportunities that come with establishing a new sovereign wealth fund. While Danantara has the potential to drive economic growth and manage government stakes in state firms, the market's reaction suggests that investors are uncertain about the economic policies under President Prabowo Subianto. The transfer of SOEs to Danantara presents a mixed bag of opportunities and challenges, and the long-term impact on Indonesia's economic growth and stability will depend on how effectively Danantara can navigate these risks and capitalize on the opportunities.