Government Must Mature Policy Mitigation to Face JCI Turbulence

JAKARTA - Financial consultant and planner Elvi Diana encourages the government to mature the mitigation of policies related to the turmoil in the Composite Stock Price Index (JCI).

The movement of the JCI was previously impacted by the sentiment of the formation of a State-Owned Enterprise (BUMN) specifically for exports, namely PT Danantara Sumberdaya Indonesia (DSI).

"The movement of the JCI in the last two days shows that the market is very sensitive to government economic policies, especially policies related to natural resource governance and the new architecture of national export management," said Elvi in a written statement quoted by ANTARA, Saturday, May 23.

According to Elvi, investors tend to wait for certainty regarding business mechanisms, transparency of governance, to the impact on the investment climate and business competition.

He said the elasticity of the capital market to state policies was very high.

"In the theory of 'behavioral finance', the market not only reacts to actual economic data, but also to perceptions, expectations and policy uncertainty," he said.

Elvi assessed that the government needed to prepare adequate mitigation steps whenever launching strategic economic policies so that turmoil in the capital market could be minimized.

He also underlined that clear and consistent public communication is one of the important factors in maintaining investor confidence.

"The government must ensure that every new policy has a transparent roadmap, a comprehensive explanation, and legal certainty guarantees. Without it, the market will easily react negatively because investors read additional risks," he explained.

He also reminded that the stability of the JCI was not only related to stock trading, but also affected business confidence, investment flows, and the overall national economic conditions.

Referring to the theory of rational expectations in economics, Elvi explained, market participants will try to predict the impact of government policies on future profits and risks.

Therefore, he argues that every major economic policy must be accompanied by a strong communication and market mitigation strategy.

The government together with capital market authorities and financial institutions is expected to strengthen coordination to maintain market stability in the midst of various national strategic policies.

"The government needs to build market confidence through transparency and policy consistency. When the market feels there is certainty and a clear direction, volatility can be suppressed," he said.