Monthly Market Summary December 2025

APBN 2025 recorded a deficit of Rp695.1 trillion (2.92% of GDP) due to weakened tax revenues, which reached only 87.6% of the target, while total state revenue declined by 3.3%. Meanwhile, government spending reached 95.3% of the target, driven by a significant increase in ministry and agency expenditures of up to 129%. Inflation rose to 2.9% YoY, mainly due to higher food prices, while CPI increased 0.6% MoM, with this upward trend expected to continue in early 2026 due to the low base effect and heightened demand during Ramadan and Eid. Manufacturing activity remained in expansion territory with the PMI at 51, reflecting solid domestic demand. In the bond market, Indonesian government bonds in IDR experienced a bull steepening, with the 10‑year yield falling to 6.07% and delivering a 12.56% return throughout 2025, while USD-denominated government bonds remained relatively stable with an 8.87% return. The market was largely driven by domestic investors, supported by a shift away from SRBI instruments, attractive valuations, and the potential for interest rate cuts. In the equity market, the JCI rose 1.6% MoM, with foreign inflows reaching USD 723 million, mainly into LQ45 and MSCI Indonesia constituents, accompanied by rotation within major conglomerate stocks. SOE consolidation is expected to act as a positive catalyst, and the market is projected to deliver double-digit returns in 2026, supported by earnings recovery in large-cap stocks. Recommended sectors include industrial metals, property, consumer staples, and cyclical names, while key risks to monitor include geopolitical tensions, global yield repricing, and accelerated AI-driven efficiency trends. Watch the video for the full explanation.