Causes of a Company's Stock Price Fluctuations

Stocks represent a person's or entity's investment in a company or corporation, providing claims on the company's earnings and assets and the right to attend the General Meeting of Shareholders (GMS). Stock prices are volatile, able to rise and fall like the price of goods or commodities in the market. This volatility adds to the appeal for investors, although it can cause anxiety when stock prices drop.

In economic theory, stock price fluctuations are normal because they are driven by supply and demand forces. If demand is high, prices will rise; conversely, if supply is high, prices will fall. Generally, the factors influencing a company's stock price fluctuations are classified into internal and external factors.

External Factors

Macro-Economic Fundamental Conditions This factor directly impacts stock price fluctuations. Some examples include:

The rise or fall of interest rates due to the Federal Reserve's policies.

The rise or fall of Indonesia's central bank (BI) benchmark interest rate and import-export values, which directly affect the rupiah exchange rate against the US dollar.

Inflation rates and high unemployment due to security factors and political upheaval also directly impact stock prices.

Fluctuations in Rupiah Exchange Rate Against Foreign Currencies The strength or weakness of the rupiah often causes stock price fluctuations on the stock exchange. Importing companies or those with foreign currency debt burdens will suffer from a weakening rupiah, resulting in increased operational costs and lower stock prices.

Government Policies Government policies, even in the discussion stage, can influence stock prices. Examples include export-import policies, corporate policies, debt policies, and Foreign Investment (PMA) policies.

Panic Factor Certain news can trigger panic in the stock market, causing investors to sell their shares. This phenomenon, known as panic selling, is usually driven by emotions and fear rather than rational analysis.

Market Manipulation Factor Market manipulation is carried out by experienced and well-capitalized investors who use mass media to manipulate certain conditions for their purposes, either to decrease or increase stock prices.

Internal Factors

Company's Fundamental Factors The company's fundamental factors are the primary cause of stock price fluctuations. Companies with good fundamentals tend to experience rising stock prices, while companies with poor fundamentals tend to see falling stock prices.

Corporate Actions Corporate actions, such as acquisitions, mergers, right issues, or divestitures, can change fundamental aspects of the company and affect stock prices.

Company's Future Performance Projections Investors and fundamental analysts use the company's performance projections as a benchmark for evaluating its stocks. Factors such as cash dividend levels, debt ratios, Price to Book Value (PBV), earnings per share (EPS), and profit levels are closely monitored. Companies with good performance projections tend to attract investors and cause stock prices to rise.

Conclusion

Many factors influence stock prices, both external and internal to the company. It is important for investors to conduct thorough analysis and not be swayed by emotions or others' opinions when making investment decisions. As Peter Lynch, a famous American stock investor, said, "Know what you own, and know why you own it."