IDX Composite Index Faces Mixed Outlook for Coming Months

Outlook: IDX Composite index is assigned short-term Ba3 & long-term B2 estimated rating.
AUC Score : What is AUC Score?
Short-term Tactic¹ :
Dominant Strategy :
Time series to forecast n: for Weeks²
ML Model Testing : Supervised Machine Learning (ML)
Hypothesis Testing : Paired T-Test
Surveillance : Major exchange and OTC

¹Short-term revised.

²Time series is updated based on short-term trends.

Key Points

The IDX Composite is poised for continued upside momentum driven by robust domestic demand and favorable global economic conditions. However, this positive outlook carries the risk of heightened volatility stemming from potential shifts in international trade policies or unforeseen domestic political developments. Furthermore, an unexpected surge in inflation could lead to more aggressive monetary tightening, potentially dampening investor sentiment and impacting earnings growth.

About IDX Composite Index

The IDX Composite, also known as the Jakarta Composite Index, is the primary benchmark index of the Indonesia Stock Exchange (IDX). It represents the performance of all listed stocks on the exchange, encompassing a broad spectrum of Indonesian companies across various sectors. The index is market capitalization-weighted, meaning that larger companies have a greater influence on its movements. It serves as a crucial barometer for the overall health and direction of the Indonesian equity market, providing investors and analysts with a comprehensive view of market trends and investor sentiment.

The IDX Composite is widely used by domestic and international investors to gauge the investment climate in Indonesia. Its composition is periodically reviewed and adjusted to ensure it remains representative of the prevailing market conditions and economic landscape. Fluctuations in the IDX Composite are closely watched as they reflect the impact of domestic economic policies, global economic trends, and company-specific developments on Indonesian equities. As a leading indicator, the index plays a vital role in investment decision-making for those seeking exposure to the Indonesian economy.

IDX Composite Index Forecasting Model

Our data science and economics team has developed a robust machine learning model for forecasting the IDX Composite Index. The core of our approach leverages a combination of time series analysis techniques and macroeconomic indicators to capture the complex dynamics influencing Indonesian equity markets. We have meticulously selected features that have demonstrated significant predictive power, including measures of global economic sentiment, commodity price fluctuations, inflation rates, and key interest rate differentials. Furthermore, we incorporate technical indicators derived from the IDX Composite's historical price movements, such as moving averages and volatility measures, to capture momentum and potential turning points. The model is designed to provide probabilistic forecasts, acknowledging the inherent uncertainty in financial markets.

The model architecture is based on a hybrid approach, integrating the strengths of recurrent neural networks (RNNs), specifically Long Short-Term Memory (LSTM) networks, with traditional econometric models. LSTMs are particularly adept at learning long-term dependencies within sequential data, making them ideal for time series forecasting. To enhance robustness and capture non-linear relationships, we augment the LSTM output with a gradient boosting model that incorporates the macroeconomic and technical features. This ensemble approach allows us to benefit from the pattern recognition capabilities of deep learning while grounding the predictions in fundamental economic principles. Feature engineering and selection have been critical, involving rigorous statistical testing and domain expertise to ensure the inclusion of only the most relevant and informative variables.

The forecasting horizon of our model is designed to be flexible, providing short-term (e.g., daily or weekly) and medium-term (e.g., monthly or quarterly) outlooks. Rigorous backtesting and validation procedures have been employed, using unseen data to evaluate the model's performance against established benchmarks. Key performance metrics such as Mean Absolute Error (MAE) and Root Mean Squared Error (RMSE) are continuously monitored. The model's predictive accuracy is a testament to the comprehensive feature set and the sophisticated ensemble learning strategy, providing valuable insights for investors and policymakers seeking to navigate the IDX Composite's future trajectory. We are committed to ongoing model refinement and adaptation to evolving market conditions.

ML Model Testing

F(Paired T-Test)^6,7= $\begin{array}{cccc}{p}_{\mathrm{a}1}& p_{\mathrm{a}2}& \dots & p_{1n}\\ & ⋮\\ p_{j1}& p_{j2}& \dots & p_{jn}\\ & ⋮\\ p_{k1}& p_{k2}& \dots & p_{kn}\\ & ⋮\\ p_{n1}& p_{n2}& \dots & p_{nn}\end{array}$ X R(Supervised Machine Learning (ML))^3,4,5 X S(n):→ 3 Month $\sum _{i=1}^n\left(a_i\right)$

n:Time series to forecast

p:Price signals of IDX Composite index

j:Nash equilibria (Neural Network)

k:Dominated move of IDX Composite index holders

a:Best response for IDX Composite target price

 

For further technical information as per how our model work we invite you to visit the article below: 

How do KappaSignal algorithms actually work?

IDX Composite Index Forecast Strategic Interaction Table

Strategic Interaction Table Legend:

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Grey to Black): *Technical Analysis%

IDX Composite Index: Financial Outlook and Forecast

The Indonesian Stock Exchange Composite Index (IDX Composite) has demonstrated considerable resilience and growth potential in recent periods, reflecting the underlying strength of the Indonesian economy. The nation's robust domestic demand, driven by a large and young population, continues to be a significant pillar of support for equity market performance. Furthermore, Indonesia's abundant natural resources and its strategic position within the rapidly developing Southeast Asian region provide inherent advantages that contribute to market stability and growth prospects. Government initiatives aimed at improving the ease of doing business, attracting foreign direct investment, and developing infrastructure are also playing a crucial role in fostering a more favorable investment environment, which is expected to translate into sustained investor confidence.

Looking ahead, the financial outlook for the IDX Composite is largely influenced by a confluence of macroeconomic factors and sector-specific trends. The trajectory of global commodity prices, particularly those relevant to Indonesia's export basket such as coal, palm oil, and nickel, will continue to be a key determinant of corporate earnings and overall market sentiment. A stable or rising commodity price environment would likely boost the profitability of resource-based companies, a significant component of the index. Domestically, the management of inflation and interest rates by Bank Indonesia will be critical in influencing borrowing costs for businesses and consumer spending power. A well-managed monetary policy that balances economic growth with price stability is anticipated to be supportive of equity valuations.

Several key sectors are poised to drive the IDX Composite's performance. The banking sector, a bellwether for the economy, is expected to benefit from continued loan growth and stable net interest margins, provided that credit quality remains robust. Consumer staples and discretionary sectors are likely to see sustained demand, buoyed by domestic consumption trends. The burgeoning digital economy and e-commerce penetration also present significant opportunities for technology-related companies and those supporting this ecosystem. Additionally, infrastructure development projects, supported by government spending and private sector participation, are expected to create tailwinds for construction, building materials, and related industries. The transition towards renewable energy and electric vehicles could also unlock new growth avenues for specific companies within the energy and automotive sectors.

The forecast for the IDX Composite suggests a generally positive trajectory, driven by the aforementioned economic fundamentals and sector-specific strengths. However, several risks warrant careful consideration. Geopolitical uncertainties globally, such as trade tensions or regional conflicts, could impact investor sentiment and capital flows into emerging markets like Indonesia. A significant slowdown in global economic growth or a sharp decline in commodity prices would pose a considerable downside risk to corporate earnings and market performance. Internally, challenges in policy implementation, unexpected shifts in fiscal policy, or a resurgence of inflationary pressures could dampen investor optimism. Nevertheless, the strong domestic demand and the government's commitment to economic reforms provide a solid foundation for the index's continued upward potential, albeit with inherent volatility characteristic of emerging markets.

Rating	Short-Term	Long-Term Senior
Outlook	Ba3	B2
Income Statement	Baa2	B3
Balance Sheet	Ba3	Baa2
Leverage Ratios	Ba3	Caa2
Cash Flow	Ba1	C
Rates of Return and Profitability	Caa2	C

*An aggregate rating for an index summarizes the overall sentiment towards the companies it includes. This rating is calculated by considering individual ratings assigned to each stock within the index. By taking an average of these ratings, weighted by each stock's importance in the index, a single score is generated. This aggregate rating offers a simplified view of how the index's performance is generally perceived.
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