As mid-October 2025 unfolded, we advised investors to initiate a strategic rebalancing, rotating capital from high-flying conglomerate stocks into Indonesia’s robust blue-chip companies, particularly within the consumer and banking sectors. This move aimed to optimize portfolio risk-reward profiles, recognizing the massive rallies in conglomerates and emerging signs of profit-taking. The market has since validated this foresight, with blue-chip performance signaling a significant shift in investor sentiment.

The Great Rotation: Blue Chips Ascend

From the close of trading on October 16, 2025, to November 3, 2025, Indonesia’s blue-chip stocks demonstrated remarkable resilience and growth. The benchmark LQ45 Index surged by a substantial +8%, starkly outperforming the broader IHSG, which climbed only +2% during the same period. This significant outperformance underscores a renewed focus on fundamental strength and stability. While a detailed table of top contributors’ valuations and consensus earnings growth is not provided here, their underlying metrics consistently suggest compelling prospects.

Catalysts for Continued Blue-Chip Momentum

We believe this blue-chip rally is merely in its nascent stages, poised for further acceleration, potentially extending well into year-end 2025. Several powerful macro and micro factors underpin this optimistic outlook:

1. Peak Pessimism Recedes, Earnings Reality Improves

The third quarter of 2025 (“3Q25”) brought a welcome relief from the earnings disappointments of 2Q25. Corporate performance, though varied, largely surpassed the tempered expectations, indicating that the market’s deepest pessimism may have been overshot. While some companies still missed forecasts, the incidence was significantly lower than in the preceding quarter. This improved outcome can be largely attributed to analyst expectations being recalibrated downwards after a weaker 2Q25 showing. For instance, consensus estimates for 2025F net profits of major banks were trimmed by approximately 1-10% following 2Q25 results.

During their 3Q25 earnings calls, management teams from leading banks projected a brighter outlook from 4Q25 onwards. Key drivers include an anticipated acceleration in credit growth and a continued decline in the Cost of Fund. Consequently, the risk of further downward revisions to post-3Q25 earnings estimates appears limited. In fact, a strengthening economy could even trigger upward revisions, injecting fresh tailwinds for the sector.

2. Economic Tailwinds Gather Pace

Monthly macroeconomic data are increasingly flashing green, signaling a robust economic acceleration. These indicators paint a picture of an economy regaining its stride:

• Money Supply (M2) & Credit Growth: In September 2025, M2 growth hit +8% YoY, marking its fourth consecutive month of expansion. Simultaneously, credit growth also accelerated to +7.2% YoY, demonstrating sustained upward momentum for the second month running.
• Indonesia Manufacturing PMI: S&P Global reported that Indonesia’s Manufacturing Purchasing Managers’ Index (PMI) climbed to 51.2 in October 2025 (up from 50.4 in September 2025). This marks three consecutive months of factory activity expansion, primarily driven by accelerating demand growth, according to S&P Global.
• BCA Business & Consumer Indices: During its 3Q25 earnings call, Bank Central Asia (BBCA) management projected an increase in working capital credit utilization in 4Q25. This anticipation aligns with expected economic acceleration and preparations for the upcoming Lebaran holidays in 1Q26. Furthermore, BCA’s proprietary Business Transaction Index and Consumer Index began an upward trend in September 2025, providing real-time evidence of improving economic sentiment.

3. Foreign Capital Returns with Confidence

The return of foreign capital underscores growing international confidence in the Indonesian market. From October 17 to November 3, 2025, the IHSG recorded a significant net foreign inflow of IDR 7.2 trillion in the regular market. This strong buying interest was remarkably consistent, with foreign outflows observed on only two of the twelve trading days. Such a sustained influx of foreign investment acts as a powerful endorsement, providing liquidity and upward pressure on blue-chip valuations.

Seizing the Opportunity: A Clear Path Forward

The narrative is clear: Indonesia’s blue-chip stocks, particularly in the banking and consumer sectors, are at the vanguard of a robust market recovery. With macroeconomic indicators signaling strength, corporate earnings stabilizing, and foreign capital flowing back, investors have a compelling case to position their portfolios for continued growth. The shift from speculative plays to fundamentally strong pillars of the economy is not just a trend; it’s a strategic imperative for navigating the evolving market landscape and capturing value in the coming quarters.