Indonesia’s Jakarta Stock Exchange Composite Index has cleared the bull-market threshold, gaining more than 10% since it hit a five-year low in early June. The index is still down about 29% for the year, but cheap prices, regulatory intervention and MSCI’s decision not to strip Indonesia of its emerging-market status have pulled buyers back.
Indonesian stocks have reached bull-market status, gaining more than 10% since the trough they hit in early June, according to LSEG data. The Jakarta Stock Exchange Composite Index is nevertheless down about 29% year-to-date.
Three forces drove the turnaround: attractive valuations, quick intervention by local financial regulators and a gradual return of foreign investors.
MSCI held off on a frontier downgrade
Indonesian shares had been on a roller coaster for much of 2026 after MSCI called into question governance on many of the country’s stocks and said it would consider downgrading the market to frontier status from emerging. Many of the companies have low free floats and significant concentration of ownership.
But the index provider ultimately decided against the downgrade, which relieved investors and helped halt panic selling, according to Gareth Leather, senior economist at Capital Economics. Investors then started pulling profits out of expensive AI and tech stocks and looked for safer, bargain-priced markets to put their cash into, he said.
An S&P affirmation and stronger tax collections shifted sentiment
S&P Global Ratings reaffirmed Indonesia’s BBB sovereign rating with a stable outlook a couple of weeks ago, which helped boost sentiment. Mohit Mirpuri, senior partner at SGMC Capital, said the affirmation lifted a macro overhang and that over the past month the market has moved from pricing in deterioration to pricing in stabilization.
Prices themselves were the other pull. Liza Camelia, head of research at Kiwoom Sekuritas Indonesia, said the selling had left equities too cheap to overlook, telling CNBC: “After months of heavy selling, Indonesian equities simply became too cheap to ignore.”
Camelia added that investors were also relieved that fiscal risks may be less severe than previously feared, after government revenue surprised on the upside, with tax collections recovering strongly during the first half.
Regulators tightened free-float and disclosure rules
The Indonesian regulator’s measures to have a higher minimum free float and tighter ownership disclosure requirements also helped address the market’s thin liquidity and the associated transparency and concentration issues that drove some investors out, said Jeemin Bang, associate economist at Moody’s Analytics.
Source: CNBC International
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