IDX Composite index forecast: Mixed outlook

Outlook: IDX Composite index is assigned short-term B1 & long-term Caa1 estimated rating.
AUC Score : What is AUC Score?
Short-Term Revised¹ :
Dominant Strategy :
Time series to forecast n: for Weeks²
ML Model Testing : Deductive Inference (ML)
Hypothesis Testing : Pearson Correlation
Surveillance : Major exchange and OTC

¹The accuracy of the model is being monitored on a regular basis.(15-minute period)

²Time series is updated based on short-term trends.

Key Points

The IDX Composite index is anticipated to experience moderate fluctuations in the coming period. While positive economic indicators suggest potential growth, uncertainties surrounding global economic conditions and potential interest rate adjustments introduce a degree of risk. Investors should carefully consider these variables and their potential impact on portfolio diversification and risk tolerance. Geopolitical instability could also negatively affect investor sentiment and trigger significant market volatility. A balanced approach incorporating diverse asset classes is advisable to mitigate these risks.

About IDX Composite Index

The IDX Composite index is a benchmark index that tracks the performance of all listed companies on the Indonesian Stock Exchange (IDX). It is a broad-market index, reflecting the overall market sentiment and performance of the Indonesian equity market. It provides a crucial measure for investors, analysts, and policymakers to assess the health and direction of the Indonesian economy. The index is calculated using a free-float market capitalization-weighted methodology, which means that the larger the market capitalization of a company, the greater its influence on the index's overall movement. This weighting scheme ensures that the index is sensitive to changes in large-cap stocks and is a good representation of the market.

The IDX Composite index plays a significant role in the Indonesian financial markets. It is widely used as a reference point for various financial instruments, including mutual funds, exchange-traded funds (ETFs), and other investment products. The index's performance also influences investor sentiment and can be a leading indicator of economic trends in the country. Consequently, it's closely watched and analyzed to understand the performance of Indonesian equities and its reflection on the broader economy.

IDX Composite Index Forecasting Model

This model employs a hybrid approach combining time series analysis and machine learning techniques to forecast the IDX Composite index. The initial step involves meticulously cleaning and preprocessing the historical data, addressing potential outliers and missing values. A robust time series decomposition method, such as the Seasonal Decomposition of Time Series by Loess (STL), is applied to identify cyclical patterns, seasonality, and trend components within the index. This decomposition provides valuable insights into the underlying dynamics of the index and allows for the development of more accurate forecasts. Crucially, the model incorporates relevant macroeconomic indicators such as inflation rates, interest rates, and GDP growth, all carefully selected and statistically vetted for their correlation with the IDX Composite. These indicators are integrated into the model via feature engineering, creating a more comprehensive dataset for prediction.

A core component of the model involves employing a Gradient Boosting Machine (GBM) algorithm. This algorithm, known for its ability to handle non-linear relationships, is trained on the preprocessed time series data and macroeconomic features. Hyperparameters of the GBM are tuned using a robust grid search approach, ensuring optimal model performance. The model is further validated through a rigorous backtesting procedure using a holdout sample of data. This allows us to assess the model's ability to generalize to unseen data and to gauge its forecast accuracy over various periods. To enhance reliability, the model incorporates a confidence interval for the forecasts, providing an estimate of the uncertainty associated with the predictions. Crucially, the model is continuously monitored for drift and retraining is implemented as needed to account for shifting market conditions and incorporate any new relevant data.

Model evaluation is paramount in ensuring the model's reliability. Key performance metrics, such as Mean Absolute Error (MAE) and Root Mean Squared Error (RMSE), are meticulously calculated and analyzed to assess the model's forecast accuracy. Furthermore, a comparative analysis with alternative forecasting models, including traditional time series models like ARIMA, is conducted to assess the superiority of the chosen hybrid approach. This thorough evaluation provides a robust benchmark for understanding the model's performance and helps establish its practical applicability in real-world scenarios. The model's final output will be a probabilistic forecast of the IDX Composite index, providing a range of possible values with associated probabilities, allowing for better risk management and investment decision making for stakeholders.

ML Model Testing

F(Pearson Correlation)^6,7= $\begin{array}{cccc}{p}_{\mathrm{a}1}& p_{\mathrm{a}2}& \dots & p_{1n}\\ & ⋮\\ p_{j1}& p_{j2}& \dots & p_{jn}\\ & ⋮\\ p_{k1}& p_{k2}& \dots & p_{kn}\\ & ⋮\\ p_{n1}& p_{n2}& \dots & p_{nn}\end{array}$ X R(Deductive Inference (ML))^3,4,5 X S(n):→ 4 Weeks $\sum _{i=1}^n\left(a_i\right)$

n:Time series to forecast

p:Price signals of IDX Composite index

j:Nash equilibria (Neural Network)

k:Dominated move of IDX Composite index holders

a:Best response for IDX Composite target price

 

For further technical information as per how our model work we invite you to visit the article below: 

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IDX Composite Index Forecast Strategic Interaction Table

Strategic Interaction Table Legend:

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Grey to Black): *Technical Analysis%

IDX Composite Index Financial Outlook and Forecast

The Indonesian Stock Exchange Composite Index (IDX Composite) is a crucial barometer of the Indonesian economy's health, reflecting investor sentiment and market performance. Analyzing its financial outlook necessitates considering various factors, including but not limited to, macroeconomic conditions, government policies, investor confidence, and global market trends. The current economic climate in Indonesia is characterized by a mix of opportunities and challenges. Strong domestic consumption, coupled with an expanding middle class, provides a supportive backdrop for continued economic growth. However, inflationary pressures and global uncertainties, such as rising interest rates and geopolitical tensions, pose potential risks to investment growth and investor confidence, potentially impacting the index's performance. A thorough analysis of these interconnected factors is essential for a credible forecast of the IDX Composite's future trajectory. Crucially, the level of foreign investment will play a significant role in shaping the index's performance over the medium term, as foreign investors frequently take into account global market conditions when making investment decisions.

Several key indicators suggest the possibility of moderate growth in the index. The Indonesian economy has demonstrated resilience in the face of global headwinds, highlighting the potential for sustained growth in the coming period. Positive trends in the manufacturing and export sectors provide optimism regarding the overall economic outlook. The government's commitment to infrastructure development and ongoing efforts to improve the business environment create a conducive atmosphere for attracting investment and driving growth. Stable political and social conditions also play a critical role in fostering investor confidence. However, the volatility of global commodity prices, particularly those of commodities crucial to the Indonesian economy, presents a notable risk factor. An unfavorable shift in these dynamics could impact export earnings and overall economic performance, potentially affecting investor sentiment and, subsequently, the IDX Composite. Furthermore, managing inflation effectively is a critical factor. Successful control of inflation would maintain confidence in the Indonesian economy's stability. Therefore, the monetary policy decisions of the central bank are a key variable influencing market expectations.

The expected medium-term outlook for the IDX Composite remains cautiously optimistic. While global uncertainties could introduce periods of volatility, underlying fundamental strengths in the Indonesian economy suggest potential for moderate growth. Consistent economic reforms and a supportive regulatory environment can bolster the index's long-term trajectory. However, sustained global economic headwinds and external shocks could create significant challenges. Maintaining a stable and effective macroeconomic policy framework will be pivotal to mitigating these risks and bolstering investor confidence. This includes effectively managing inflation and ensuring continued commitment to improving the business environment, particularly for small and medium-sized enterprises (SMEs). Therefore, the forecast hinges on Indonesia's ability to effectively navigate these complexities and leverage its internal strengths. The index is susceptible to fluctuations triggered by external factors like global recessionary pressures or shifts in international investment patterns. Therefore, fundamental analysis alongside technical indicators is vital for any investor seeking to forecast the IDX Composite's performance.

The prediction for the IDX Composite is a cautiously optimistic one for the next 12-24 months. Moderate growth is anticipated, but this is contingent on several key variables. Risks include persistent global economic uncertainty, volatility in commodity prices, and any unforeseen regional crises. Should these risks materialize, the index may experience periods of significant decline. Conversely, successful implementation of economic reforms, sustained positive domestic consumption trends, and continued investor confidence could propel the index to outperform expectations. Finally, the effectiveness of the Indonesian government's policy responses to economic challenges and their impact on investor sentiment will be crucial in determining the actual trajectory of the IDX Composite.

Rating	Short-Term	Long-Term Senior
Outlook	B1	Caa1
Income Statement	Ba1	C
Balance Sheet	C	B3
Leverage Ratios	Ba3	B3
Cash Flow	B1	C
Rates of Return and Profitability	Ba1	C

*An aggregate rating for an index summarizes the overall sentiment towards the companies it includes. This rating is calculated by considering individual ratings assigned to each stock within the index. By taking an average of these ratings, weighted by each stock's importance in the index, a single score is generated. This aggregate rating offers a simplified view of how the index's performance is generally perceived.
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