Violent conflicts in Indonesia have temporarily eased, and the impact on our listed companies is limited | Lianhe Zaobao

In the past week, large-scale street protests in Indonesia escalated into violent clashes. As the president responded to public demands and military and police strengthened law enforcement, the situation temporarily eased. Some Singapore-listed companies with significant operations in Indonesia saw their stock prices decline, but analysts generally believe the overall impact on stock prices is limited. Jardine C&C, which was once a component of the Straits Times Index in Singapore, saw its closing price on Friday (September 5) drop by 3.2% compared to August 28. It holds more than 50% of shares in Astra International, Indonesia's largest automotive dealer. Hu You, a research analyst at FSMOne Singapore's research and portfolio management department, told Lianhe Zaobao that Astra International has significant operations in Jakarta and other cities affected by the protests. Local unrest could disrupt showroom operations and logistics networks, suppressing consumer demand for cars, which may be the reason for the stock price decline. However, Tan Yingying, chief stockbroker at Phillip Securities, pointed out that Jardine C&C's stock price had already risen to a high for the year before the outbreak of violence in Indonesia, and the decline may be a normal correction rather than directly caused by the conflict. Lippo Malls Indonesia Retail Trust, which is listed on the Singapore Exchange and focuses on commercial real estate in Indonesia, fell about 6% on Tuesday (September 2). Hu You believes that the trust's malls are mainly located in densely populated areas, making them highly sensitive to store closures and potential property losses caused by protests. However, from the outbreak of the protests to Friday, the stock price of Lippo Malls Indonesia Retail Trust remained relatively stable. Lin Ziping, chief investment strategist at Moomoo Singapore, pointed out in an interview that local retail businesses reportedly lost about $33 million (SGD 42.45 million) in sales, but companies listed on the Singapore Exchange with exposure to the Indonesian market seemed to be largely unaffected. He also mentioned that the trigger for the recent violence was the accidental death of a Grab delivery driver by a riot control vehicle on August 28. However, as of Thursday (September 4), Grab's stock price had actually risen by 1.6% compared to August 28, showing no significant impact from the unrest. According to Grab's 2024 financial report, its Indonesian business accounts for about 23% of the group's total revenue. Further Reading Police officer involved in the death of a rider dismissed as Indonesia calms public grievances Indonesian central bank unexpectedly cuts interest rates to 5%, boosting Indonesia's economic growth Other Singapore-listed companies with significant operations in Indonesia, such as Wilmar International, Golden Agri Resources, and the three major local banks with subsidiaries and branches in Indonesia, have not yet been affected in terms of stock prices. Oiltek International, which specializes in vegetable oil processing technology and renewable energy solutions, announced before the market opened on Thursday that its projects operating in Indonesia are not located near the major cities of the protests, thus are not affected by the unrest. The company's stock price rose by more than 2% that day. Analysts: Although the situation has eased, there are still potential economic risks In the local Indonesian stock market, the Jakarta Composite Index fell by about 3% after the outbreak of the conflict, but stock prices have been recovering continuously since September 2. Analysts point out that although the situation has eased, potential economic risks in Indonesia still exist. Cai Ren'ai, an analyst at Credit Suisse Group's Asian Equity Research Department, noted that due to the government's swift withdrawal of controversial policies and efforts to calm the market, the unrest in Indonesia is expected to subside, and economic growth in the second half of the year may be supported by interest rate cuts from the central bank. However, issues such as governance, cost of living, and income inequality remain unresolved, and the Indonesian stock market may need to bear a higher risk premium. Radhika Rao, an economist at DBS Group Research, believes that since the protests were of short duration, the economic impact is not yet significant. However, if the official calming measures are deemed insufficient, subsequent conflicts may suppress consumer demand, tourism, and investment. "We maintain our view of a slowdown in economic growth in the second half of the year." Hu You pointed out that if protests continue or sporadically erupt in the coming months, the impact may not be limited to operational disruptions but could also affect the broader macroeconomic environment. Long-term unrest may weaken business activity, reduce consumer confidence and spending, and put pressure on the Indonesian rupiah and stock market. She believes that the non-essential consumer goods sector is most vulnerable to shocks, especially retail-oriented businesses such as shopping malls and the food and beverage industry, which will face direct operational pressures