Malang- Stock price growth in Indonesia’s basic chemical industry during the post-pandemic period has been driven primarily by company profitability rather than inflation or interest rate movements. This conclusion comes from a peer-reviewed study by Aminul Amin of Malangkucecwara College of Economics (STIE Malangkucecwara), Malang, published in 2026 in the East Asian Journal of Multidisciplinary Research. The findings matter for investors, businesses, and policymakers because the chemical industry plays a critical role in Indonesia’s industrial supply chain, supporting sectors such as fertilizers, pharmaceuticals, petrochemicals, and manufacturing.
The research analyzes stock price growth of basic chemical companies listed on the Indonesia Stock Exchange (IDX) between 2021 and 2024, a period marked by economic recovery after COVID-19, fluctuating inflation, and shifting interest rate policies. At a time when many investors closely watch macroeconomic indicators, the study shows that internal company performance—specifically Return on Equity (ROE)—has been far more influential in shaping market valuations.
Why the chemical industry matters
The basic chemical industry is a backbone of Indonesia’s economy. Its products feed into agriculture, healthcare, automotive manufacturing, electronics, and construction. Because of this strategic position, stock price movements in the sector are often seen as signals of broader industrial health.
After the pandemic, global supply chain disruptions, rising commodity prices, and monetary tightening created uncertainty across capital markets. Inflation and interest rates were widely expected to affect stock performance, particularly in capital-intensive sectors like chemicals. However, investors also increasingly focused on company fundamentals as a way to manage risk during volatile conditions.
Against this backdrop, Aminul Amin’s study provides timely evidence on which factors actually mattered most for stock price growth during the recovery period.
How the analysis was conducted
The study uses a quantitative explanatory approach based on secondary data from publicly listed basic chemical companies on the IDX. Financial statement data were combined with national inflation and interest rate figures covering 2021–2024.
Rather than relying on descriptive comparisons, the research applied a statistical modeling approach to examine how inflation, interest rates, and ROE influenced stock price growth simultaneously. This allowed the author to measure not only the direction of each relationship but also its strength and statistical reliability.
In simple terms, the analysis asked a straightforward question: when stock prices of chemical companies rose or fell, which factor explained the change most convincingly?
Clear results from the market data
The findings point strongly in one direction. Return on Equity (ROE) emerged as the only variable with a positive and statistically significant effect on stock price growth in the basic chemical industry.
Key results include:
- ROE showed a strong positive relationship with stock price growth. Companies that generated higher returns from shareholders’ equity tended to experience higher stock prices.
- Inflation did not have a significant effect on stock price growth during the study period, even though its numerical direction aligned with economic theory.
- Interest rates also showed no statistically significant impact, despite a weak negative tendency.
The analysis confirms that profitability, as reflected by ROE, was the most reliable predictor of stock price movements in the sector. Macroeconomic variables such as inflation and interest rates played a much smaller role than often assumed.
What this means for investors
For investors in Indonesia’s stock market, the implications are practical and immediate. The results suggest that company fundamentals matter more than macroeconomic noise, at least in the basic chemical sector during the post-pandemic recovery.
High ROE signals efficient management, strong earnings generation, and effective use of capital. According to the study, the market rewarded these characteristics with higher stock valuations, regardless of inflation trends or interest rate changes.
As Aminul Amin explains, investors appear to prioritize profitability over external conditions when assessing chemical companies. In ethical paraphrase, he notes that market confidence is built more on a firm’s ability to generate returns from equity than on short-term macroeconomic fluctuations, especially when inflation remains within manageable levels.
Implications for companies and policymakers
The findings also carry important messages for corporate leaders and regulators.
For company management, the study reinforces the value of improving operational efficiency and profitability. Strategies that enhance ROE—such as cost control, productivity improvements, and prudent capital management—are more likely to translate into higher stock prices than attempts to time macroeconomic cycles.
For policymakers and regulators, the results suggest that while maintaining macroeconomic stability remains essential, investor confidence in the stock market also depends heavily on corporate performance and transparency. Strong disclosure standards and good corporate governance help investors assess profitability and make informed decisions.
In sectors like basic chemicals, where production costs and global commodity prices can fluctuate sharply, maintaining healthy returns on equity appears to be a key buffer against external shocks.
Why inflation and interest rates mattered less
The study does not argue that inflation and interest rates are irrelevant. Instead, it shows that during the observed period, their direct influence on chemical sector stock prices was limited.
One explanation is that moderate inflation levels may already be priced into investor expectations. Similarly, interest rate changes may affect companies indirectly or over longer horizons, rather than producing immediate and measurable effects on stock prices.
In contrast, ROE offers a clear, company-specific signal that investors can quickly interpret. In uncertain times, this clarity may explain why profitability indicators dominate investment decisions.
Author profile
Aminul Amin
Malangkucecwara College of Economics (STIE Malangkucecwara), Malang, Indonesia.
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