COMPOSITE STOCK PRICE INDEX INCREASE: MOMENTUM OR MIRROR OF PUBLIC ECONOMIC STABILITY

Abstract

Indonesia’s capital market exhibited a positive trend as the Composite Stock Price Index reached the 8,000 level during August-October 2025. This article examines whether that rise constitutes a short-term momentum driven by market sentiment and fiscal measures or instead reflects more fundamental public economic stability. Employing a literature review that synthesizes theoretical and empirical findings with emphasis on recent empirical studies while incorporating relevant seminal works the study also includes a case study of the government’s placement of IDR 200 trillion in state-owned banks (Himbara) on 12 September 2025. The case study is accompanied by a descriptive analysis of index movements and a simple event-study procedure to assess short-term market reactions. The review indicates that the Composite Stock Price Index is influenced by a mix of macro-fundamental factors (inflation, interest rates, exchange rates, and growth) and psychological or institutional factors (fiscal policy and government credibility). Although liquidity-enhancing fiscal action acted as a catalyst for sentiment-driven momentum, preliminary evidence suggests the index’s rise alone does not yet confirm medium-term public economic stability without corroborating improvements in macro-fundamental indicators.