Jakarta, CNBC Indonesia \u2014 Analysts have explained why the Jakarta\nComposite Index (JCI) has continued to correct. The index remains under\npressure and has recorded a significant decline this week, falling 7.48%\ncumulatively.<\/p>\n
They said the weakness in the domestic equity market reflects a\ncombination of external and domestic factors, including uncertainty over\nthe direction of US interest-rate policy, rising bond yields and\ninvestor concerns about Morgan Stanley Capital International\u2019s (MSCI)\nreview of Indonesia\u2019s capital market.<\/p>\n
Handiman, managing director of Solstice Indonesia, said one external\nfactor weighing on the market was growing concern about the direction of\nthe US Federal Reserve\u2019s monetary policy.<\/p>\n
Although the US central bank decided to hold interest rates, the\ndecision was not unanimous. Two Fed officials openly backed a\n25-basis-point rate rise, citing persistently high US inflation.<\/p>\n
That prompted markets to reassess the outlook for US monetary policy.\nThe probability of a Fed rate rise in December was estimated at 80%,\nbringing the prospect of \u201chigher for longer\u201d interest rates back into\nfocus for investors.<\/p>\n
\u201cAlthough rates were held, the FOMC decision was not unanimous. Two\nFed officials openly backed a 25-basis-point rise because US inflation\nis considered still high,\u201d Handiman said.<\/p>\n
The rise in US Treasury yields, which reached 5.042%, has also made\nassets in emerging markets, including Indonesia, less attractive. This\nhas encouraged investors to move funds back to the United States.<\/p>\n
External pressure has also come from an escalation in geopolitical\ntensions, which has again disrupted the outlook for global energy\nsupplies. Houthi attacks on Saudi Arabian oil refinery facilities were\nsaid to have raised concerns about global crude oil supplies.<\/p>\n
Brent crude prices surged above US$110 a barrel. Higher energy prices\ncould add to global inflationary pressure and increase Indonesia\u2019s\nfiscal burden through higher energy costs and subsidies.<\/p>\n
Domestically, Handiman said several factors had intensified pressure\non the JCI. One was the risk that MSCI could downgrade Indonesia\u2019s\nequity market from emerging-market to standalone-market status.<\/p>\n
The uncertainty has drawn the attention of foreign investors because\nit could affect perceptions of the quality and attractiveness of\nIndonesia\u2019s capital market.<\/p>\n
Pressure has also come from the rupiah\u2019s depreciation, which at one\npoint reached Rp18,185 per US dollar. A weaker rupiah further increases\nthe risks faced by foreign investors holding domestic assets.<\/p>\n
In addition, a plan to exclude HSC shares from the JCI calculation\nfrom 2 November has raised the prospect of large-scale portfolio\nadjustments, or rebalancing, by investment managers.<\/p>\n
\u201cGovernment bond yields have surged to around 7.6%, their highest\nlevel since late 2022. This rise reflects a heightened perception of\nfiscal risk and makes equities less competitive than the domestic bond\nmarket,\u201d Handiman told CNBC Indonesia on Friday (30 October 2026).<\/p>\n
Meanwhile, capital-market observer Elandry Pratama said the JCI\u2019s\ncurrent correction could not be attributed solely to the Fed\u2019s decision\nto hold interest rates. In his view, that decision was relatively\npositive for global markets, but was not enough to remove pressure\nstemming from domestic factors.<\/p>\n
One of the main issues is uncertainty surrounding MSCI\u2019s review,\nparticularly its assessment of share-ownership transparency and the\ninvestability of Indonesia\u2019s market.<\/p>\n
This has led some foreign investors to adopt a wait-and-see approach\nand exercise greater caution when placing funds in the domestic equity\nmarket.<\/p>\n
The pressure is reflected in continued net foreign selling. On 29\nOctober, foreign investors recorded net sales of around Rp1.52 trillion\non the regular market.<\/p>\n
Selling has also been significant in large-cap stocks, particularly\nin banking, including PT Bank Central Asia Tbk. (BBCA), PT Bank Rakyat\nIndonesia (Persero) Tbk. (BBRI) and PT Bank Mandiri (Persero) Tbk.\n(BMRI).<\/p>\n
Elandry added that the Fed\u2019s decision to keep rates unchanged was not\na strong enough catalyst to reverse the JCI\u2019s direction. Investors are\nstill monitoring the outlook for US monetary policy, inflation\ndevelopments and the US dollar\u2019s movements.<\/p>\n
\u201cSo, I see the JCI\u2019s current correction as a combination of capital\noutflows, rupiah pressure and a rising risk premium on the domestic\nmarket,\u201d Elandry told CNBC Indonesia on Friday (30 October 2026).<\/p>\n
He said the JCI was likely to remain highly volatile until foreign\nfund flows returned and investor confidence recovered.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/jci-continues-to-weaken-as-analysts-explain-the-causes-1793346650", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }