Stock Market Reaction of LQ45 U.S.-Trading Partners

Hengky Surya Bhuana; Ida Bagus Anom Purbawangsa

doi:10.59261/bustechno.v7i3.710

Authors

Hengky Surya Bhuana Universitas Udayana
Ida Bagus Anom Purbawangsa Universitas Udayana

DOI:

https://doi.org/10.59261/bustechno.v7i3.710

Keywords:

Abnormal Return, Efficient Market Hypothesis, Event Study, Stock Market Reaction, Trump Reciprocal Rates 2025

Abstract

Background: The reciprocal tariff policy introduced by President Donald J. Trump on April 2, 2025, triggered widespread uncertainty across global financial markets, with notable implications for Indonesia’s equity market. International trade measures of this nature can reshape investor sentiment, particularly among firms with substantial commercial ties to the United States.

Objective: This research investigates how Indonesian equity market participants responded to the 2025 U.S. reciprocal tariff announcement by comparing average abnormal returns across pre- and post-event periods and examining market behavior surrounding the announcement date.

Methods: Employing a quantitative event study design, this research selects LQ45 constituents engaged in U.S. trade activities through purposive sampling. The market-adjusted model is used as the benchmark for estimating expected returns, and the analysis incorporates descriptive statistics, paired-sample t-tests, and one-sample t-tests to examine abnormal return patterns.

Results: The findings reveal a statistically significant difference in average abnormal returns between the pre- and post-announcement periods. Notably, negative abnormal returns emerged on d−2 and d−1 before the announcement, suggesting that market participants had already incorporated the anticipated policy effects into stock prices prior to the official disclosure.

Conclusion: These results indicate that Indonesia’s equity market demonstrated an efficient response to publicly available information, consistent with the characteristics of semi-strong form market efficiency. The study highlights the significant role of international trade policies in shaping investment behavior and emphasizes the importance of incorporating cross-border economic risks into portfolio management strategies.

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