What is the IHSG? and how is the IHSG determined by its index value?
For stock players or investors who may already be familiar with the abbreviation IHSG, IHSG itself is an abbreviation of the Composite Stock Price Index. but perhaps not many know what the function of the JCI itself is, and the factors that make the JCI value change.
Definition and a brief history of the JCI
The Composite Stock Price Index or commonly abbreviated as IHSG is one of the stock market indices used by the Indonesia Stock Exchange which was first introduced on April 1, 1983. The JCI was then used as an indicator of stock price movements on the JSE. This index includes the price movements of all common shares and preferred shares listed on the IDX. The Base Day used for the calculation of the JCI is August 10, 1982. On that date, the Index was determined with a Base Value of 100 and listed shares at that time totaled 13 shares. In English, the JCI is known as the Indonesia Composite Index (ICI) or the IDX Composite. IHSG is an index that contains a combination of all share values traded on the IDX.
How is the JCI calculation method?
IHSG is calculated using the following formula:
IHSG = (Market Value / Base Value) x 100
Where Market Value is the average value of the traded stock market value, while the Base Value is the market value on August 10, 1982. That is why the JCI value on August 10, 1982 was exactly 100, and the number 100 became the basis for calculating the JCI value at that time. next time. That date is used as the basis for calculation because the JCI was introduced to the public on April 1, 1983. The Basic Value itself will always adjust whenever there is an addition of new issuers, or corporate actions such as warrants or rights issues.
To make it easier to understand in the present context, the JCI is calculated based on the comparison between the value of shares in the market compared to the basic price of shares at the time of the IPO.
The JCI calculation is carried out every day, usually after the closing of the stock exchange on that day, and news and movements from the JCI are always eagerly awaited by market players.
In the near future, with the development of technology, it is hoped that the JCI calculation can be done several times or even in a few minutes, this can be done after the automated trading system is implemented properly.
Interesting facts about the JCI
The highest intraday position achieved by the JCI was 6,689,287 points recorded on February 19, 2018.
The highest closing position ever reached was 6,355.65. on December 29, 2017.
- Representing Market Trend - JCI Index is often used as an indicator of ongoing economic activity. The three JCI increases, the stock prices will also rise and that shows the market is in positive sentiment and the economy is getting better and vice versa.
- As an Indicator of Profit Level - The numbers in the JCI Index show that the company is getting large profits related to the type of investment to be chosen so the higher the JCI value, the more profitable it will be if we put shares in the company.
- Portfolio performance benchmarks - The average index value of the JCI is a benchmark for transaction strategies to be used so that investors will get optimal profits and reduce the risks that may occur. If the IHSG Index is higher than the increase in the investor portfolio, the portfolio that is being managed is not good, and vice versa if the portfolio rises higher than the increase in the JCI value, it can be said that the business is performing quite well.
Factors that influence the JCI Value
The movement of the JCI value is actually more dominantly influenced by macroeconomic conditions, namely the environment that can affect the daily performance and operations of companies. For this reason, an investor, apart from knowing the fluctuation in the JCI value, must also know what macroeconomic factors influence it so that it can be used as additional considerations in determining investment.
- Inflation - Inflation has a significant influence on the JCI and has a negative correlation, meaning that if there is an increase in inflation, the JCI value will decrease, otherwise the inflation rate announced by the government will decrease, the JCI value will tend to rise.
- Interest Rates - Between interest rates (BI rate) and IHSG have a negative relationship, meaning that every time there is a decrease in interest rates, the JCI will increase and vice versa if interest rates rise, the JCI will fall.
- Rupiah Exchange Rate - Between the rupiah exchange rate and the JCI value / index has a positive relationship, which means that if the rupiah exchange rate increases, the JCI will also tend to rise and vice versa if the rupiah exchange rate decreases, the JCI will also decline.