Indonesian stocks slump over 41% in 2026

Indonesian stocks have suffered a steep sell-off this year, with the benchmark index on the Indonesia Stock Exchange tumbling roughly 41 per cent.

Trading on that Friday saw the index briefly drop to 4,979 before recovering to finish above the psychological 5,000 mark.

The equity downturn has been closely tied to concerns raised by index provider MSCI. Earlier in October, MSCI warned that Indonesia could face a downgrade to standalone status due to worries over opaque shareholding structures and coordinated trading activity in the market.

Officials and market participants view the MSCI evaluation as a significant blow to investor sentiment, particularly regarding perceptions of transparency, governance and credibility in Indonesia’s capital market. These concerns are seen as increasing the risk of selling pressure and prompting some foreign investors to hold back on expanding investment.

In response to MSCI’s notice dated 15 October, Indonesia’s Financial Services Authority (OJK) announced sanctions against more than a dozen entities found to be involved in market manipulation. The OJK has collected IDR2.1 trillion in fines from these sanctioned firms, although their identities have not been disclosed.

Authorities have highlighted the need to end practices known locally as saham gorengan, involving coordinated churning and ramping of share prices that are detached from corporate fundamentals. One company under scrutiny is PT Dian Swastatika Sentosa, whose ultimate controlling shareholder was among the business figures present at a recent industry forum where the crackdown was discussed.

President Prabowo Subianto’s brother, acting as the president’s special envoy and an advisory board chairman at the Indonesian Chamber of Commerce and Industry, has called for urgent improvements in equity-market transparency. He said he had been tasked by the president to help ensure the situation does not escalate and urged corporate leaders to stop "deep frying" stocks.

He warned that a withdrawal of foreign investment from the stock market could weaken the rupiah and raise the cost of servicing foreign loans, describing the risk as potentially severe for the wider economy. Bank Indonesia governor Destry Damayanti stated that currency fluctuations reflect multiple dynamics, including global market sentiment, and reiterated that the central bank remains focused on maintaining currency stability to support real-sector expansion.

The prolonged slump in share prices is having a direct impact on domestic investors. Hashim said there are 32.7 million Indonesian citizens with brokerage accounts and that they were "extremely dissatisfied" as the value of their holdings had fallen.

Market commentary points to structural issues in governance and market integrity as ongoing burdens on the index, underscoring the importance of reforms to restore confidence. At the same time, some analysts project that if the index can hold above the 5,000 level, it may trade sideways within the 5,000 to 5,200 range in the near term, while investors await upcoming economic data releases, including manufacturing PMI, trade balance, inflation, and third-quarter 2026 growth figures.