Does the tariff war subside bring positive sentiment to the JCI? Here's BNI Asset Management's explanation

STOCKWATCH.ID (JAKARTA) - The tension of the United States (US) vs China tariff war that has colored the media in the last 2 months now seems to be easing after the two countries agreed to lower import tariffs. The US, which previously set high trade tariffs unilaterally for its trading partner countries, is now showing a softer stance after going through intensive negotiations held in Geneva - Switzerland, for 2 days on Saturday to Sunday (10-11/05/2025).

In the agreement, the US agreed to reduce tariffs on imported products from China by 145% to 30%. And while China also lowered tariffs for various products from the US to 10% from the previous 125%.

Farash Farich – Chief Investment Officer of BNI Asset Management predicts that “the easing of US-China trade war tensions will have a positive impact on global capital markets including the JCI which has the potential to improve and continue strengthening since its lowest point this year in early April. The Indonesian stock market was seen strengthening this morning, reflected in the strengthening of the JCI to the level of 6,948.9 led by the Infrastructure sector, energy and transportation sectors and the negative sector is in the technology sector.”

"The US-China trade tariff agreement provides positive sentiment for investors, although it is not a final settlement. As conveyed by Scott Bessent, US Treasury Secretary, this is a pause to prevent long-term damage from the trade war, because a full agreement may take 2-3 years as happened in the previous US-China Trade War experience,” said Farash.

Farash added that “this agreement shows that the US-China Government is currently more pragmatic than the previous attitude in early April 2025. The governments of both countries are now more responsive to concerns about the economic impact of tariff increases that could increase the risk of slowing economic growth in both countries and globally.

Thus, this temporary trade war agreement still provides positive sentiment for the market. The Indonesian stock market is in a position to benefit from this development where the JCI valuation, based on the price-to-earning ratio, is still below minus 1-standard deviation compared to its historical average and lower than the historical average of the valuation of developing countries' stock markets in Asia. In addition, the portion of foreign ownership in our stock market is the lowest in the last 10 years ”.

For investors with long-term investment needs and high risk appetite, they can consider the BNI-AM IDX-Pefindo Prime Bank Stock Index Mutual Fund to take advantage of the strengthening stock market. In addition, it is supported by an attractive valuation where the price-to-book ratio is also below its historical average and in the first quarter of 2025, big banks' net profit is aligned with market expectations.

Meanwhile, investors with short-term and medium-term investment needs and a lower to moderate risk appetite can consider the BNI-AM Dana Likuid Money Market Mutual Fund and the BNI-AM Teakwood Fixed Income Mutual Fund with short-duration corporate bonds as the underlying asset to maintain the principal value of their investment and the investment results of both mutual funds obtained in the short term can be gradually allocated a little to invest in stock mutual funds to provide additional investment returns.

In addition, the BNI-AM Quality Long Duration Fund with long-term government bonds as the underlying asset can be considered if there is a correction in the bond market that causes the 10-year bond yield to be around 7% or more.