Jakarta. Investors have been shrugging off the impact of radicalism on the Indonesian economy and they seem to put their money where their mouths are.
Over the past decade, the impact of terror attacks on the Jakarta Composite Index (JCI) have become less noticeable, ranging from a 0.55 percent decline in the day after suicide bombs attacks on the J.W. Marriot and Ritz-Carlton hotels in South Jakarta in July 2009, to a 0.23 percent increase after the suicide bomb attack at Kampung Melayu in East Jakarta in May this year.
The shock value from terror attacks has diminished as such events have become more frequent and smaller in scale, while data compiled over the past decade shows the JCI recovering most of the losses recorded on the day of an attack within 10 days.
“After such attacks, investors immediately assess how it will impact the economy and company earnings,” said Reza Priyambada, an analyst at brokerage firm Binaartha Sekuritas.
“Recent attacks have become much smaller in scale and seemed to have been specifically targeted at the police… It would be a different story if an attack hits key areas such as harbors or airports,” he added.
Most of the terrorist attacks are not at a level that could wreak havoc on the economy, Reza said. Investors mostly look at economic fundamentals to put the impact of such events into perspective.
“It also helps that the government has been responding fast to such events by rounding up potential threats before more attacks could occur. This props up investor confidence in the country’s stability,” he said.