(June 3): Indonesian stocks plunged to their lowest level in five years and the rupiah hit a record low on Wednesday in another stark reminder of the multi-faceted challenges confronting Southeast Asia’s biggest economy.
The benchmark Jakarta Composite Index (JCI) slid 4.1% to close at its lowest since June 2021, after tumbling 5.7% intraday. Materials led the declines, with a subgauge of the sector plummeting 9.1%. The rupiah weakened about 0.6% to 17,950 per dollar, leading losses in Asia, as Brent crude prices advanced for a third day.
The sell-off highlighted a confluence of concerns weighing on investor sentiment. Elevated oil prices are fuelling worries about fiscal and external balances, while fears of greater state intervention in the commodities sector and any fallout from a potentially adverse MSCI Inc reclassification have spooked global funds. Down about 31% in 2026, the JCI is already the worst performer this year among more than 90 global equity indices tracked by Bloomberg.
“Investors remain cautious amid lingering concerns over Indonesia’s fiscal trajectory, speculation around a potential sovereign rating downgrade, and continued rupiah weakness,” said Mohit Mirpuri, a partner at SGMC Capital Pte Ltd. “While valuations are becoming increasingly attractive, investors are looking for a positive catalyst whether in the form of policy clarity, rating stability, stronger capital inflows, or a more constructive MSCI review to restore confidence.”
The latest slump came after data on Tuesday showed Indonesia’s trade surplus nearly vanished in April as soaring prices for imported oil and gas outpaced export gains. Consumer prices rose 3.08% in May from a year earlier, exceeding the median estimate in a Bloomberg survey of economists and moving further above the midpoint of Bank Indonesia’s 1.5%-3.5% target.
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The sell-off in Jakarta came even as a broader benchmark of Asian stocks extended its rally to reach a record high on Wednesday.
“What makes the current episode particularly striking is the growing divergence between Indonesia and the rest of the world,” said Liza Camelia Suryanata, the head of research at PT Kiwoom Sekuritas Indonesia. “This is no longer a story about a broad-based emerging-markets sell-off. Increasingly, it is becoming a story about Indonesia-specific risk.”
The rupiah has depreciated around 7% against the dollar this year, the worst performance among global emerging-market currencies tracked by Bloomberg. The nation’s foreign-exchange reserves fell in April to the lowest in nearly two years as the central bank stepped up intervention to defend the rupiah.
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On Wednesday, the central bank said it will continue to monitor developments in global and domestic financial markets, and maintain a market presence by taking necessary, consistent and measured steps to keep the rupiah stable.
Falling reserves have increased the risk of credit rating downgrades, with Fitch Ratings Inc and Moody’s Ratings already having cut their outlooks this year.
In contrast to the weakness in equities and the rupiah, Indonesia’s sovereign bonds gained on Wednesday. The yield on 10-year debt was down six basis points at 6.70%.
Concerns that Indonesia’s credit rating and outlook “might be downgraded due to higher risk of a widening fiscal deficit” are weighing on stocks, said Henry Wibowo, a former JPMorgan Chase & Co strategist who co-founded Alphagate Capital in Jakarta. Weakness in the rupiah, which is approaching the 18,000-per dollar mark, is also adding to that pressure, he added.
In recent weeks, worries about tighter government control of the key commodities sector have also sapped sentiment. President Prabowo Subianto announced in May that the administration would take direct control of exports of some of Indonesia’s most important commodities.
A subgauge of stocks in the basic materials sector plunged more than 11% intraday. It slumped almost 23% last month.
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Meanwhile, Indonesian prosecutors on Wednesday searched the headquarters of the agency that oversees Prabowo’s flagship free meals programme. The search came a day after the leader replaced agency chief Dadan Hindayana and two deputies, citing concerns over food quality control and organisational discipline.
The JCI has fallen every month this year and is on track for the biggest annual loss since 2008. The sell-off has also seen Indonesia cede its title as Southeast Asia’s biggest stock market to Singapore after a five-year reign. Global funds have withdrawn more than US$3.2 billion ($4.1 billion) from local stocks this year.
MSCI last month cut some stocks linked to the country’s richest billionaires from its indices due to concern over concentrated ownership. The move followed investor complaints about the accessibility of some stocks for trading, which had prompted the index compiler to warn in January of a possible downgrade to frontier status.
“What investors are selling today is not merely Indonesian equities. They are selling confidence in the broader Indonesia investment narrative,” said Suryanata of Kiwoom Sekuritas.
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