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10/14/2022 12:00 AM
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Covid-19 and the Impact on Capital Market Performance in Indonesia By Muhammad Adisurya Pratama


Cases of coronavirus disease 2019 (Covid-19) are back on the rise in line with the emergence of a new subvariant, namely Omicron XBB.  A faster transmission rate than other sublineages has prompted vigilance concerning the impact of this new subvariant. 

Based on data from, the World Health Organisation (WHO) stated on 10th November 2022 that Covid-19 cases totalled 630,601,291 globally, with fatalities reaching 6,583,588.  On the same day, cases in Indonesia stood at 6,544,201, with 158,989 total deaths recorded.

The Covid-19 pandemic triggered a global crisis, which began as a health crisis but quickly mutated into a socio-economic crisis, which also impacted the financial sector. 

Supervisory and regulatory authorities in Indonesia, namely the Financial Services Authority (OJK), have acknowledged that the pandemic dealt a massive blow. The Jakarta Composite Index (JCI), for example, slumped from a level of 6,300 to just 3,900 in the three months from the beginning of 2020 until 20th March 2020.

Transaction volume also plummeted from 35,534,971,048 transactions in 2019 to 27,495,947,445 transactions in 2020, reflecting the wait-and-see attitude of investors given concerns stoked by uncertain market conditions moving forward.

In addition, investor panic was exacerbated by the Covid-19 mutations that emerged, such as Delta in the middle of 2021 and Omicron at the end of 2021 and beginning of 2022.

Which factors affected the capital market, particularly during the Covid-19 pandemic?  Various studies have explored the dynamics between Covid-19 and the capital markets in different jurisdictions. 

Phan and Narayan (2020) explored the response of the state and capital market to Covid-19, opining that the markets reacted to all unexpected news events.  This is consistent with the government's reaction to Covid-19.  Research by Hadar and Sethi (2021) found that market speculation impacted capital market fluctuations and that news events relating to Covid-19 also influenced the capital market. 

In their research, Rizvi, Juhro and Narayan (2021) analysed market reactions to the monetary and fiscal stimuli response to Covid-19 in four major ASEAN countries, namely Indonesia, Malaysia, Singapore and Thailand, concluding that monetary policy experienced a lag in terms of influencing stock market yields, while fiscal policy was effectively used as a buffer to dampen the effect of pandemic-related losses on the capital market. 

There are three salient factors, therefore, that affect the capital market.  First, policy stimuli implemented by the government and central bank. In the context of monetary policy, the central bank implemented quantitative easing (QE) by purchasing securities issued by the government. QE measures influenced capital market performance in each jurisdiction.  Meanwhile, fiscal stimuli served as an economic buffer for the business community.  Ultimately, both forms of stimuli strengthened capital market performance. 

Second, speculation and news articles concerning Covid-19.  The uncertainty brought about by the Covid-19 pandemic increased speculation on the capital market in Indonesia. Furthermore, news events relating to Covid-19 also influenced current and future market movements.  Third, the government response to each situation.  Government response to the pandemic also influenced capital market conditions because the government response also determined how well the economy would recover moving forward.



Hadar, A., & Sethi, N. (2021). The news effects of COVID-19 on global financial market volatility. Bulletin of Monetary Economics and Banking, Special Issues 2021, 33-58.

Phan, D.H.B., & Narayan, P.K. (2020). Country responses and the reaction of the stock market to COVID-19 – A preliminary exposition. Emerging Markets Finance and Trade, 56(10), 2138-2150.

Rizvi, S.A., Juhro, S.M., & Narayan, P.K. (2021). Understanding market reaction to COVID-19 monetary and fiscal stimulus in major ASEAN countries. Bulletin of Monetary Economics and Banking, 24(3), 313-334.



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Halaman ini terakhir diperbarui 11/25/2022 10:55 AM
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