Indonesia Stocks Suffer World's Worst First-Half Slump as OJK Addresses MSCI Concerns

JAKARTA, Investortrust.id — Indonesia's benchmark stock index recorded the world's steepest first-half decline after foreign investors dumped billions of dollars in local equities, while regulators sought to reassure markets that MSCI has not placed the country in regulatory limbo.

The Jakarta Composite Index (JCI), known locally as the IHSG, fell 34.73% during the first six months of 2026, ending Tuesday at 5,643, down from 8,646 at the close of 2025. The decline surpassed losses recorded during both the 2020 COVID-19 market crash and the 2008 global financial crisis, making it the worst first-half performance in the history of the Indonesia Stock Exchange (IDX).

Foreign investors were net sellers of more than Rp73.5 trillion ($4.6 billion) over the period, with heavyweight banking and conglomerate stocks bearing the brunt of the selloff.

The sharp decline underscores how rapidly investor sentiment toward Indonesia has deteriorated despite easing geopolitical tensions.

Global funds remain concerned about Indonesia's market transparency, weakening capital inflows, and a depreciating rupiah, while expectations of higher U.S. interest rates continue to divert money toward dollar-denominated assets.

The country's regulators now face increasing pressure to restore confidence before foreign capital outflows become more entrenched.

OJK Rejects Claims Indonesia Has Been 'Suspended' by MSCI

Indonesia's Financial Services Authority (OJK) dismissed suggestions that MSCI has effectively placed Indonesia "on hold" until November after the global index provider decided to continue monitoring reforms in the country's capital market.

Hasan Fawzi, OJK's Chief Executive for Capital Market Supervision, Derivatives and Carbon Exchange, said MSCI's June 24 announcement should not be interpreted as a delay in deciding Indonesia's market classification.

"Many people highlighted MSCI's note as if Indonesia had been 'suspended' until November. That is simply not true," Hasan told reporters at the Indonesia Stock Exchange building in Jakarta on Tuesday.

Instead, he said MSCI is asking regulators and market participants to demonstrate that recently introduced reforms are being implemented consistently and effectively.

"What MSCI expects is for us to apply all of these action plans consistently and effectively," Hasan said.

According to Hasan, November is not a deadline for a market classification decision. Rather, if Indonesia fails to implement the reforms satisfactorily by then, MSCI could place the country on its Consultation List, similar to FTSE Russell's Watch List process.

"If we are found not to have implemented these measures consistently and effectively, Indonesia would only be placed on the Consultation List," he said.

MSCI said it requires additional time to assess the effectiveness of reforms before determining Indonesia's future classification.

The index provider continues to cite concerns over shareholder ownership transparency, disclosure of true free-float levels, indications of coordinated trading in certain listed companies, and the overall quality of market disclosures.

According to MSCI, these issues affect both Information Flow and Market Infrastructure, raising questions over the investability of Indonesia's equity market.

Foreign Selling Intensifies Historic Market Rout

Indonesia's market weakness has accelerated since President Prabowo Subianto took office in October 2024. Since then, the Jakarta Composite Index has fallen more than 27%, losing over 2,100 points.

The largest drags on the benchmark during the first half included major heavyweight stocks such as PT Dian Swastatika Sentosa Tbk (DSSA), PT Barito Renewables Energy Tbk (BREN), PT Bank Central Asia Tbk (BBCA), PT Bank Rakyat Indonesia Tbk (BBRI), PT Telkom Indonesia Tbk (TLKM), PT Chandra Asri Pacific Tbk (TPIA), PT Barito Pacific Tbk (BRPT), PT Amman Mineral Internasional Tbk (AMMN), and PT Bank Mandiri Tbk (BMRI).

Every major sector ended the first half in negative territory. Energy stocks dropped more than 40%, property shares fell over 38%, and infrastructure stocks declined more than 35%.

Analysts Say Domestic Confidence Is Now the Biggest Challenge

Despite easing tensions in the Middle East, analysts believe Indonesia's domestic fundamentals have become the dominant driver of investor sentiment.

Head of Research and Chief Economist at PT Mirae Asset Sekuritas Indonesia, Rully Arya Wisnubroto, said markets remain vulnerable as investors brace for further U.S. monetary tightening.

"Easing geopolitical risks provide positive sentiment for markets. However, expectations that the Federal Reserve will continue raising interest rates through the end of the year mean global monetary conditions remain tight, and market volatility is likely to stay elevated," Rully said during Mirae Asset's Fear vs Fundamentals: Where Is Indonesia Really Headed event in Jakarta on Tuesday.

He added that Indonesia's recovery will depend largely on restoring confidence in domestic economic policies.

"Going forward, Indonesia's market recovery will be determined by investor confidence in domestic policies. Investors should remain focused on fundamentals and become more selective in their investment strategies," Rully said.