The Potential Impact of Elections on the Stock Market: Sectors to Watch for Profits

Mentari Puspadini, CNBC Indonesia

Market

Wednesday, 11/10/2023 08:05 WIB

Photo: The government through the Ministry of Finance (Kemenkeu) has allocated a budget of IDR 71.3 trillion for holding general elections (Pemilu) in 2024. (Doc: Ministry of Finance)

Jakarta, CNBC Indonesia – Entering the political year, a number of catalysts are predicted to have a positive influence on the Composite Stock Price Index (IHSG). A number of sectors also benefit.

The chairman of the Indonesian Securities Analysts Association (AAEI) believes that the economy will grow and move positively during the election process. The reason is the effect of the large budget for the presidential, legislative and regional elections, which reached IDR 109.1 trillion.

With a budget of this size there will definitely be equal spending on goods and services throughout the country. Not to mention, the economic turnaround will be even more massive through campaign funds.

“The average spending for one election participant’s campaign budget is just IDR 1 billion, for example, if it is busy it will contribute IDR 10 trillion to the economy,” said David while attending the 2024 Economic & Capital Market Outlook at the Indonesian Stock Exchange Building, Tuesday (10/10/2023 ).

He also added that through campaign events, candidates for office will definitely produce many banners, t-shirts and even hold events to gather votes. So investment in the domestic sector has potential.

“The tendency is that the domestic oriented sector, consumption and hotel tourism will increase because there are lots of meetings,” said David.

Historically, the JCI generally always strengthens during a political year. This strengthening also escalated during the election process.

For example, during the 2004 election process under Susilo Bambang Yudhoyono (SBY), the index increased by 17.7%. Even in the 2009 Jokowi era election, the IHSG rose even more sharply to 53.7%.

“Even though there was pressure at the beginning of the campaign process, when the voting process was over, the index strengthened again,” said David.

However, he reminded that economic factors and government policies will still influence stock index movements. Sometimes in a political year, the US dollar and oil prices will also creep up.

The Association of Indonesian Securities Analysts (AAEI) and the CSA Community see that investors are still waiting and seeing and are worried about the 2024 political year. To address this, it is hoped that the 2024 Economic & Capital Market Outlook can provide investors with an overview of capital market conditions, so that they can respond to the political year reasonably and wisely.

“The political year will continue for five years and there is no need to respond excessively. After all, elections have already taken place several times and the capital market continues to grow,” said the Main Director of the Indonesian Capital Market Professional Certification Institute (LSPPMI) Haryajid Ramelan.

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