Definition, Benefits, and How to Calculate IHSG (Indonesia Composite Index)

In 1983, the Indonesia Stock Exchange (IDX) launched a stock indexing feature known as the Indonesia Composite Index (IHSG). IHSG is highly useful for investors who want to analyse stock market data.

IHSG is presented in a concise visual statistic by IDX, showing the overall movement of stocks in a single chart. Today, accessing IHSG is much easier thanks to the internet—no need to visit IDX in person.

To help you better understand IHSG, let’s dive into the explanation below.

What is IHSG?

As mentioned earlier, IHSG stands for “Indeks Harga Saham Gabungan”, or Indonesia Composite Index, which is a stock chart that shows the movement of all listed stocks on IDX averaged together.

IHSG simplifies the process for investors to understand the general condition of the capital market in real-time, without needing to analyse each stock individually.

According to IDX, IHSG measures the performance of all stocks listed on the main and development boards. Internationally, it is also referred to as the Indonesia Composite Index (ICI).

Other examples of stock indexes in Indonesia include: IDX80, IDX Quality30, LQ45, ISSI, and more.

How IHSG is Formed

IDX provides various stock indexing tools, including the IHSG chart. This chart helps investors and other stakeholders track the performance of investment instruments.

IHSG reflects the “investment climate” of the Indonesian capital market. You can easily check IHSG by simply searching “IHSG today” on Google, and the latest value will appear at the top.

Before it’s published to the public, IDX calculates the index using the Market Capitalization Weighted method. Once the calculation is complete, the updated IHSG value is released on IDX’s official site and across capital market platforms.

This value is then used by various parties to inform their investment decisions.

Benefits of IHSG

IHSG brings benefits for all participants in the stock market. Here are some key advantages:

1. Shows Market Movement

IHSG’s chart shows how stocks are moving in the capital market.
Through this, market players can analyse stock performance in real-time within the country.

2. Serves as a Benchmark for Portfolio Performance

• IHSG displays average stock data, which acts as a benchmark for investors.
• If a stock price per lot is higher than the IHSG, it usually indicates strong performance.

3. Provides Profit Estimation

IHSG can help estimate potential profit, especially for prospective investors.

4. Used as a Passive Investment Product

• Passive investment products are those designed to generate passive income, such as index mutual funds or bonds.
• These are typically held long-term without daily involvement from investors.

Key Terms in IHSG

To better understand IHSG, here are some important terms you should know:

• Bubble: A sudden and significant increase in stock prices.
• Portfolio: A performance report of stocks, showing price movements and demand trends over time.
• Fluctuation: The collective up-and-down movement of stock prices in the market.
• Liquidity: An aspect that determines how easily a stock can be traded, impacting the IHSG value.
• Cut Loss: A situation where investors sell their assets early to avoid greater losses.

How to Calculate IHSG

IHSG calculations started on August 10, 1982, which serves as the base date of the index.

Here’s the formula used:

P = closing price on the regular market
X = total number of shares
D = base value

The index reflects the movement of stocks through an auction-based trading system. If a company experiences a capital change or other stock-related factors, the base value is adjusted accordingly.

In the case of new listings such as rights issues, warrants, partial listings, or delistings, the base value is also adjusted.
However, if there’s a stock split or stock dividend, the base value remains unchanged, as the market value is not affected.

IHSG uses stock prices from the stock exchange, based on the auction system, and the index is recalculated every trading day after the market closes.

Other Indexes Besides IHSG

Apart from IHSG, other indexes can help investors track combined stock movements:

• LQ45: Measures the strength of the 45 most liquid and high-capitalisation stocks.
• IDX30: Tracks 30 stocks with the highest liquidity and market capitalisation.
• Kompas100: Monitors 100 top-performing stocks with strong liquidity and large market cap, managed by Kompas Gramedia Group.
• Bisnis27: An index that evaluates 27 selected stocks, curated by the Bisnis Indonesia Index Committee, managed by PT Jurnalindo Aksara Grafika.

Brief History of IHSG

IHSG was introduced on April 1, 1983, to monitor price movements of stocks on the Jakarta Stock Exchange (BEJ).
However, its base calculation dates back to August 10, 1982, with an initial value set at 100, and 13 stocks listed.

IHSG’s all-time highest intraday position was 6,704.46, recorded on November 11, 2021,
with the highest closing position also reached on the same day at 6,691.34.

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