Tariff War Eases: Good News for IHSG Rise?

Kamis, 15 Mei 2025

Tariff War Eases: Good News for IHSG Rise?

Ragamutama.com – JAKARTA. The tariff war tension between the United States (US) and China that has been heating up for the past two months has now eased. The two countries reached an agreement to lower import tariffs, marking a softening of the US's stance which previously imposed high tariffs unilaterally on its trading partners.

The easing of the US's stance follows two days of intensive negotiations in Geneva, Switzerland (10-11/05/2025). In the agreement, the US lowered tariffs on imported products from China from 145% to 30%. Meanwhile, China also reduced 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 tensions will have a positive impact on global capital markets, including the JCI which has the potential to strengthen further after reaching its lowest point this year in early April. The strengthening of the JCI to the level of 6,948.9 yesterday was led by the infrastructure, energy, and transportation sectors, while the technology sector weakened.

"The US and China trade tariff agreement provides positive sentiment for investors, although it is not final," said Farash in a press release, Thursday (5/15). 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, in line with the experience of the previous US-China trade war.

Farash added that this agreement shows a more pragmatic approach from the US and Chinese governments compared to the initial stance in April 2025. Both governments are now more responsive to concerns about the economic impact of tariff increases that could slow economic growth in both countries and globally.

This temporary agreement continues to provide positive sentiment for the market. The Indonesian stock market benefits from this development. The JCI valuation, based on the price to earnings ratio, is still below minus 1 standard deviation compared to its historical average and lower than the historical average valuation of developing country stock markets in Asia. In addition, foreign ownership in the Indonesian stock market is at its lowest level in the last 10 years.

Investors with long-term investments and high risk appetite can consider the BNI-AM IDX-Pefindo Prime Bank Stock Index Fund to take advantage of the strengthening stock market. Attractive valuations, with a price-to-book ratio below its historical average, and the large bank's net profit in the first quarter of 2025 in line with market expectations, support this choice.

Meanwhile, investors with short- and medium-term investments and low to moderate risk appetite can consider the BNI-AM Dana Likuid Money Market Fund and the BNI-AM Teakwood Fixed Income Fund with underlying short-term corporate bonds to maintain the principal value of the investment. The investment results of both mutual funds can be gradually allocated to stock mutual funds to increase returns.

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