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758

Journal Of Economics, Technology, and Business (JETBIS)

Volume 3, Number 3 March 2024

p-ISSN 2964-903X; e-ISSN 2962-9330

CAPITAL MARKET REACTION TO THE ANNOUNCEMENT OF FUEL PRICE

INCREASE ON STOCK RETURNS OF LQ 45 TRANSPORTATION SUB-SECTOR

IN 2023

Erlina

, Nelly Meinissa Azahra

, Acep Komara

Universitas Swadaya Gunung Jati

Email: [email protected]

, [email protected]

KEYWORDS:

Abnormal Return, Trading

Volume Activity, Capital

Market Reaction, Fuel,

Transportation

ABSTRACT

The research was conducted to find out the reaction of the capital

market to the rise in BBM in transportation and logistics sector

companies listed on the Indonesian Stock Exchange. This study is an

event study or event that arises directly from the rise in the price of oil

(BBM) on October 1, 2023, against the market reaction based on the

actions of transportation and logistics companies. Abnormal Return

and Trading Volume Activity are variables used to analyze reactions.

The data collection method used in this research is the Quantitative

Data Method. Observations were conducted for 5 days before and 5

days after the BBM rise on October 1, 2023, using the Wilcoxon

Signed Ranks test with a sample of 10 companies and a data test of

110. On the test results, there were abnormal differences in return and

trading volume activity before and after the rise in BBM prices, the

results could help market participants understand market dynamics,

find investment opportunities, and manage risk. With a rise in sales,

this means investors respond to events so that the markets react. The

findings support the theory of signals because investors see the

announcement of a BBM rise as a signal that can affect the stock price.

INTRODUCTION

The capital market is comprised of two primary segments: the stock market and the bond

market. In the stock market, investors have the option to acquire company shares, thereby

becoming stakeholders in the company. In the bond market, governments or companies can

secure funds by issuing bonds, which investors then purchase. The presence of a capital market

enables companies to access a more extensive source of funding beyond relying solely on bank

loans or internal revenue. Beyond offering investment opportunities to financiers, the capital

market also provides companies with the means to acquire capital for expanding businesses

and undertaking projects. As asserted by Lawrence (2013), the capital market plays a pivotal

role as one of the driving forces behind a country's economy.

Fluctuations in stock prices in the capital market reveal the inconsistency among capital

market participants. The shifts in stock prices stem from investors' responses to information,

encompassing both business-specific and overall economic factors. Capital market investors

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typically seek information regarding a country's political and economic conditions, influencing

potential changes in stock prices (Rinda et al., 2014).

Fuel oil (BBM) holds a crucial role in the daily lives of Indonesians. Transportation,

business, and various domestic sectors rely on fuel as a fundamental commodity. Indonesia's

fuel history is marked by challenges, opportunities, and transformations, influencing public

policy, the environment, and the economy. Since the discovery of petroleum, fuel has served

as Indonesia's primary energy source. Pertamina, the country's largest energy company, plays

a pivotal role in fuel production, distribution, and management. However, a significant

challenge for Indonesia is its reliance on imports to fulfill domestic needs, prompting shifts in

policies and the exploration of more environmentally friendly alternative energy sources.

Changes in global crude oil prices and government policies regarding fuel subsidies or

regulations play a significant role in shaping the capital market. Typically, the stock prices of

energy-related companies or sectors impacted by oil prices tend to mirror fluctuations in global

oil prices. When oil prices rise, it usually translates to increased share prices for oil and gas

companies, whereas a decrease often leads to a decline. Additionally, government

announcements regarding fuel subsidies, regulatory changes, or initiatives to reduce

dependence on fossil fuels can have a notable influence on the capital market, particularly

affecting the energy sector.

The Indonesian government has effectively implemented policies aimed at ensuring

economic stability, which include regulations pertaining to fuel price adjustments. The

objective behind the government's decision to raise fuel prices is to enhance the welfare of the

populace and stimulate economic development within the nation. While the dynamics of the

capital market may not be directly impacted, the increase in fuel prices remains linked to stock

market activities (Akbar et al., 2019).

A rise in fuel prices has the potential to influence investors' decisions regarding buying

and selling shares in the capital market. This, in turn, can impact the behavior and attitudes of

investors engaged in trading shares, leading to a market response. The dissemination of

information to consumers, issuers, and investors affects trading activities in the capital market.

For instance, stock prices may fluctuate, either rising or falling, in the period preceding and

following the receipt of information by market participants (Grenda et al., 2023).

Fluctuations in stock prices can prompt abnormal returns, which refer to returns earned

by investors that deviate from their anticipated returns, potentially eliciting a market response.

These market reactions can be assessed by comparing abnormal returns before and after a

specific event or day. Additionally, market reaction can be gauged through trading volume

activity, which serves as a tool for assessing market responses to information within the capital

market by analyzing trading activity. Trading volume activity indicates how market prices

adjust to changes in information. Securities experiencing high trading volumes typically yield

significant stock returns (Liogu and Saerang, 2015).

The government has officially declared an upcoming fuel price hike scheduled to take

effect on October 1, 2023. The adjustments involve Pertamax Non-Subsidized, increasing from

IDR 13,300 to IDR 14,000 per liter, Pertamax Turbo from IDR 15,900 to IDR 16,600 per liter,

Dexlite from IDR 16,350 to IDR 17,200 per liter, and Pertamax Dex from IDR 16,900 to IDR

17,900 per liter (Pertamina.com). Dexlite fuel has experienced the most significant fluctuations

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this year, according to Pertamina data. At the beginning of the year in January 2023, the price

was registered at IDR 16,150 per liter. It steadily declined until reaching a low of IDR 12,650

in June. However, in the subsequent months, the price rose again, reaching IDR 17,200 on

October 1, 2023. Additionally, Pertamax Dex reached a second-highest record. Calculating

between the lowest price in June, IDR 13,250, and the highest price in October, IDR 17,900,

Pertamax Dex increased by 35%, equivalent to IDR 4,650. Meanwhile, the current price of

Pertamax Dex rose by 6.8%, or Rp 1,150, from the initial price of Rp 16,750. Furthermore, as

of October, Pertamax Turbo witnessed a 22% increase, or Rp 3,000, compared to the lowest

price this year, which was Rp 13,250.

The surge in crude oil prices, which has remained at US$ 90 per barrel since September

8, 2023, has influenced the increase in fuel prices. At 14:00 WIB, the price of Brent crude oil

increased to US$ 94.77/barrel, as reported by Refinitiv. Currently, WTI oil prices stand at US$

91.28 per barrel. Oil prices have maintained their highest level in over a year since November

11, 2022. Following this, in early September, there was a notable spike in crude oil prices.

Saudi Arabia has opted for a voluntary reduction in oil production by 1 million barrels per day

(bpd) until the year-end, with a further decrease to 9 million barrels per day (bpd) in October,

November, and December 2023. Additionally, Russia has decided to extend its voluntary cut

of 300,000 barrels per day until December 2023. (cnbcindonesia.com).

Analyzing market responses before and after the fuel price hike on October 1, 2023,

reveals potential consequences. The escalation in fuel prices may result in increased operational

expenses for transportation companies, including airlines, land, and sea transport entities. Such

a scenario can directly affect both individual travel costs and distribution expenses for

companies. In order to gain a clearer understanding of the policy's impact, the researcher holds

stocks in the transportation and logistics sector, an industry heavily reliant on fuel for its

operations.

Research conducted in 2016 by Desi & Silvana and in 2020 by Ketut et al. shows that

there is no substantial variation in Trading Volume Activity (TVA) before and after the

announcement of the gasoline price hike, nor is there a discernible change in abnormal returns

during each occurrence. In contrast, studies by Stesia & Ivonne (2014) and Siti Choriliyah et

al. (2016) show that there was a notable difference in Trading Volume Activity (TVA) and

average abnormal returns between the time before and after the fuel reduction announcement.

The researchers in this study selected a research topic that looked at how rising fuel prices

affected stock returns because of a variety of relevant factors. More precisely, businesses that

depend heavily on fossil fuels are believed to be vulnerable to growing fuel costs. Moreover,

alterations in the stock prices of specific issuers could indicate how the capital market responds

to the rise in fuel prices. This study aims to ascertain any variations in Abnormal Return and

Trading Volume Activity (TVA) prior to and following the announcement of the fuel price

hike. Additionally, it seeks to explore the Indonesian capital market's reaction in the case of a

gasoline price increase. Giving investors relevant information to utilize as a guide when

deciding what to buy and sell in the capital market is the study's main objective. Therefore, the

study's question is whether there is a significant positive average abnormal return and trading

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volume activity (TVA) for the LQ 45 Transportation Sub Sector stocks before, during, and

after the fuel price increase event on October 01, 2023.

RESEARCH METHODS

This research is an event study that specifically addresses the October 1, 2022, fuel price

hike (BBM) and its effects on market responses in the transportation and logistics companies

industry. This study compares the trading volume activity (TVA) and abnormal return (AR) of

enterprises in the transportation and logistics industry before and after the October 1, 2023,

fuel price hike.

Sample, Population, and Sampling Procedures. 37 logistics and transportation firms that

are listed on the Indonesia Stock Exchange (IDX) make up the study's population. corporations

in the Transportation and Logistics sector listed on the IDX, corporations with complete stock

prices for the entire 2023 period, and enterprises defined as large with significant operating

experience were the particular criteria used in a purposive sampling technique. As a result, the

study used ten companies as its sample size. There are 110 total data points for analysis when

taking into account observations made five days prior to and five days following the fuel price

hike (BBM). The Indonesia Stock Exchange website (https://idx.co.id) provided secondary

data for this investigation.

This research employs the quantitative data collection method, characterized by a

research approach that utilizes numerical data and relies on statistical and mathematical

analysis to comprehend and interpret the studied phenomenon. Secondary data serves as the

source for this research, acquired indirectly through intermediary channels, particularly the

Indonesia Stock Exchange website.

In this research, a comparison will be made between data before and after the

announcement of fuel price increases. If the data follows a normal distribution, the data analysis

will employ the t-test. However, in cases where the data does not exhibit a normal distribution,

the Wilcoxon Signed Ranks test will be utilized.

RESULTS AND DISCUSSION

Deskripsi Analisis

The initial analytical step in this research is referred to as descriptive analysis.

Descriptive analysis aims to furnish general descriptive information regarding fuel prices

before and after the October 1, 2023, increase. Table 1 presents the mean, minimum, maximum

values, and standard deviation for both Abnormal Return and Trading Volume Activity during

the study period.

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Table 1

Descriptive analysis

Descriptive Statistics

Minimum

Maximum

Mean

Std. Deviation

110

-1,35178

5,27494

,0000002

,60749955

TVA

110

,00009

,03009

,0017462

,00325800

Valid N

(listwise)

110

Source: data processed 2024

Based on Table 1, the Abnormal Return and Trading Volume Activity (TVA) were

examined in 110 samples before and after the fuel price increase. The Abnormal Return showed

an average of 0.0000002, ranging from a minimum value of -1.35178 to a maximum value of

5.27494, with a standard deviation of 0.60749955. Meanwhile, Trading Volume Activity

(TVA) exhibited an average of 0.0017462, with a minimum value of 0.000009, a maximum

value of 0.03009, and a standard deviation of 0.00325800.

For the Abnormal Return (AR) variable before and after the fuel price increase, the

standard deviation value exceeds the mean value. This implies a considerable variation in the

data, indicating that any given average cannot be regarded as a representative sample for all

the data.The next variable is Trading Volume Activity (TVA) which has similar results to the

AR variable, namely, the standard deviation value is greater than the mean value, this indicates

that there is a fairly high data variation which means that any available average cannot be

considered as a sample that represents all data.

Normality Test

The normality test is a technique used to determine whether a data set has a normal

distribution or not, to determine this data is done using the Shapiro-Wilk Test conducted in this

study with a significance level of 0.05. The basic decision for making is :

1. If the significance level is >0.05 then the data will be normally distributed.

2. If the significance level is <0.05 then the data will not be normally distributed.

Table 2

Data Normality Test Results

Tests of Normality

Kolmogorov-Smirnov

Shapiro-Wilk

Statistic

Sig.

Statistic

Sig.

,378

110

,000

,375

110

,000

TVA

,306

110

,000

,435

110

,000

a. Lilliefors Significance Correction

source: data processed 2024

From the table provided, it is evident that the significance value for Abnormal Return

before and after the fuel price hike is 0.000, which is less than 0.05. This indicates that the data

is not normally distributed. Similarly, the significance value for Trading Volume Activity

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before and after the fuel price increase is also 0.000, less than 0.05, suggesting that the data is

not normally distributed.

Wilcoxon Signed Rank Test

The Wilcoxon Signed Ranks test was used to test the two hypotheses in this study. The

test results for the first and second hypotheses are presented in the following table:

Table 3

Uji Peringkat Wilcoxon Signed Rank Data Abnormal Return dan Trading Volume Activity

(TVA)

Ranks

Mean Rank

Sum of Ranks

TVA -

Negative Ranks

46,21

4205,00

Positive Ranks

100,00

1900,00

Ties

Total

110

a. TVA < AR

b. TVA > AR

c. TVA = AR

The table indicates that there are 91 samples with negative ranks, having a mean rank of

46.21 and a sum of ranks totaling 4,205.00. This signifies that 91 samples exhibited a decline

in both Abnormal Return and Trading Volume Activity. The mean rank, or the average

decrease, is 46.21. However, the number of negative ranks is 4,205.00. On the other hand, there

are 19 samples with positive ranks, boasting a mean rank of 100.00 and a sum of ranks reaching

1,900.00. This implies that 19 samples are undergoing an increase in both Abnormal Return

and Trading Volume Activity. The mean rank, or the average increase, is 100.00. Nevertheless,

the number of positive ranks is 1,900.00. In this table, the ties value is 0, leading to the

conclusion that there is an identical value between Abnormal Return and Trading Volume

Activity before and after the fuel price increase event in 2023.

Table 4

Wilcoxon Signed Rank Test Results Abnormal Return and Trading Volume Activity (TVA)

Data

Test Statistics

TVA -

-3,437

Asymp. Sig. (2-

tailed)

,001

a. Wilcoxon Signed Ranks Test

b. Based on positive ranks.

Table 4 shows the Wilcoxon signed rank test results with a significance level of 0.05.

The basic decision is :

1. If the Asym.Sig level <0.05 then the Hypothesis is accepted.

Capital Market Reaction To The Announcement Of Fuel Price

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2. If the Asym.Sig level > 0.05 then the Hypothesis is rejected.

Table 4 displays a z-score result of -3.437 with a significance value of 0.01 < 0.05.

From this, we can infer that Hypotheses 1 and 2 are accepted, signifying a distinction in the

average Abnormal Return and Trading Volume Activity before and after the fuel price

increase.

Discussion

Analyzing the results of the Wilcoxon Signed Ranks test reveals a notable difference in

Abnormal Return before and after the fuel price increase. This confirms that the market's

response to the fuel price increase event carries substantial informational content, prompting

investors to react upon the announcement. Consequently, observing the market's reaction to the

fuel price increase announcement implies that the signal from the event prevents investors from

anticipating abnormal occurrences. This finding aligns with previous studies by Stesia &

Ivonne (2014) and Siti Choriliyah et al. (2016), which also demonstrated a significant

difference in the average abnormal return before and after the announcement of both declining

and increasing fuel prices.

Trading Volume Activity mirrors Abnormal Return, indicating differences before and

after the fuel price increase. This affirms that the announcement of the fuel price increase

triggered heightened buying and selling activities among investors on the Indonesia Stock

Exchange (IDX). As buying and selling activities increase, investors respond to unfolding

events, causing a reaction in the market. The findings of this study align with signal theory, as

investors perceive the announcement of a fuel price increase as a signal capable of influencing

stock prices. This research is consistent with the studies conducted by Stesia & Ivonne (2014)

and Siti Choriliyah et al. (2016), which demonstrate variations in Trading Volume Activity

before and after the announcement of both declining and increasing fuel prices.

CONCLUSION

Previous research on the impact of increasing fuel prices on the movement of

Transportation and Logistics sector stocks concludes that there are significant differences in

the AR and TVA variables of these stocks in the period before and after the announcement of

rising fuel prices. This suggests that the government's policy of increasing fuel prices as of

October 1, 2023, influences market conditions, eliciting reactions, particularly in the

Transportation and Logistics sector stocks.

Investors are expected to consider published information when making investment

decisions. This is necessary to determine the best way to analyze the economic value of the

published announcement data. Investors are expected to look at information from multiple

perspectives, not just one. For example, they should look at the increase in fuel prices in

Indonesia and also understand information about fuel prices worldwide.

Future research is anticipated to broaden its scope, encompassing a wider range of

studies. Additionally, employing calculation methods other than Wilcoxon Signed Rank may

introduce additional factors influencing the level of abnormal stock returns and trading volume

activity for companies. Given the limited sample in this study, subsequent research endeavors

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will strive to include all companies listed on the Indonesia Stock Exchange for enhanced

accuracy.

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