Understanding IHSG, History and Development of the Composite Stock Price Index in Indonesia

Kapanlagi.com - The Composite Stock Price Index (IHSG) is one of the main indicators that reflects the dynamics of the stock market in Indonesia. Since its introduction on April 1, 1983, the IHSG has become an important barometer for investors and market participants.

This index includes all common and preferred stocks listed on the Indonesia Stock Exchange (BEI), providing a comprehensive picture of the stock market conditions in the country.

Since its launch, the IHSG has undergone a colorful journey with various changes and developments. The base date for calculating the IHSG was set on August 10, 1982, with an initial value of 100, at that time only 13 stocks were listed.

However, over time, the number of companies joining has increased, and the IHSG recorded an all-time intraday high of 7,377.49 points on September 15, 2022. This indicates that the IHSG is not just a market indicator, but also reflects the level of investor confidence in the Indonesian economy.

So, why is the IHSG so important? This index not only reflects the overall performance of the stock market but also serves as a tool to measure market sentiment.

The movements of the IHSG, whether up or down, can provide valuable signals to investors regarding their investment direction. Therefore, a deep understanding of the IHSG is key for anyone looking to invest in the Indonesian capital market.

Let’s explore further the history and development of the IHSG in Indonesia, as summarized by Kapanlagi.com on Thursday (7/11).

1. What is IHSG?

IHSG, or the Composite Stock Price Index, is the main barometer that describes the price dynamics of all stocks listed on the Indonesia Stock Exchange (IDX).

As a vital indicator, IHSG encompasses various types of stocks—both ordinary and preferred—and provides a comprehensive picture of the economic health and performance of the capital market in the country.

Thus, IHSG serves as an important reflection for investors to understand the direction of stock market movements in Indonesia.

2. Brief History of IHSG

Since its launch in 1983, the Composite Stock Price Index (IHSG) has become an important barometer for investors in Indonesia.

Starting with only 13 companies listed based on a base value set in 1982, the IHSG has experienced rapid growth as the number of listed companies has increased.

Now, this index increasingly reflects the dynamics of a more complex and diverse market, making it a primary reference in the world of investment.

3. IHSG Calculation Method

The Composite Stock Price Index (IHSG) is calculated in an interesting way, based on the market value of all stocks listed on the Indonesia Stock Exchange (BEI).

The process involves calculating the closing price of each stock, which is then multiplied by the number of shares outstanding, so that every fluctuation in stock prices will have a direct impact on the value of the IHSG.

In addition, adjustments are also made when there are significant changes in the capital structure of issuers or when new issuers join, making the IHSG a dynamic mirror of the performance of the Indonesian stock market.

4. The Highest Position of IHSG

On September 15, 2022, the IHSG reached an impressive intraday peak of 7,377.49 points, while its highest closing was recorded on September 13, 2022, at 7,318.20 points.

The surge in these figures is evidence that amidst various market fluctuations, investors' enthusiasm for investing in stocks listed on the Indonesia Stock Exchange remains strong.

5. Functions and Benefits of IHSG

The Composite Stock Price Index (IHSG) plays a crucial role in the investment world, serving as an invaluable barometer of market sentiment. When the IHSG soars, it signals a positive indication that stock prices, in general, are skyrocketing, and vice versa.

Additionally, the IHSG also serves as a benchmark for various investment products, such as index mutual funds and ETFs, providing clear guidance for investors.

Moreover, this index also helps them assess systematic risk and measure portfolio performance, making it a very important tool in smart investment strategies.

6. Innovation and Development of Indices

The Indonesia Stock Exchange continuously innovates to meet the needs of market participants by launching more than 40 stock indices that are ready to provide in-depth insights into various sectors of the economy.

Among these indices, LQ45 and IDX30 stand out, measuring the liquidity and fundamentals of leading companies. With this variety of options, investors can now more easily navigate the dynamic and opportunity-filled world of investment!

7. Latest Developments

In recent years, automated trading technology has made its way into the Indonesia Stock Exchange (IDX), bringing a breath of fresh air for investors.

With this innovation, the calculation of the Composite Stock Price Index (IHSG) can now be done more frequently, providing accurate real-time information about stock price fluctuations in the market.

This not only enhances transparency but also makes it easier for investors to make smarter and quicker decisions in transactions.

8. Frequently Asked Questions About IHSG: What Factors Influence IHSG Movements?

The movement of the Composite Stock Price Index (IHSG) is influenced by various factors, ranging from macroeconomic conditions that affect people's purchasing power, government policies that can boost or suppress the market, to the financial reports of major companies that serve as a barometer of economic health.

Additionally, ever-changing global sentiment also adds a unique flavor to IHSG fluctuations, making it a dynamic and interesting indicator to watch.

9. How to Invest Using the Composite Stock Price Index (IHSG)?

Investors can now utilize the IHSG as a smart guide in determining investment product choices, such as index mutual funds or ETFs, that align with the movements of this index.

By using the IHSG as a benchmark, they can achieve more directed and strategic investment opportunities.

10. Why is it Important to Monitor the Development of the IHSG?

Monitoring the movements of the IHSG is key for investors to uncover the secrets of market trends, allowing them to make smarter and more profitable investment decisions.

(kpl/rmt)