The Composite Stock Index (IHSG) collapsed this morning, Monday 9\nMarch 2026, touching its lowest level at minus 5.2% to the 7,156 mark. A\ntotal of 449 stocks declined, 57 rose, and 158 remained unchanged with\ntransaction value reaching Rp 1.5 trillion.<\/p>\n
Over the past week, the IHSG plummeted nearly 8% in just one week,\nmarking the worst performance exceeding the MSCI crash of late January.\nThere are three principal causes behind the movement in Indonesia\u2019s\nstock market.<\/p>\n
In recent times, the IHSG has not only been influenced by domestic\nfactors but also by external pressures and changes in global investor\nperception towards Indonesia as an investment destination.<\/p>\n
Escalating geopolitical tensions, particularly in the Middle East\nregion, have prompted global investors to adopt a more defensive stance.\nIn such conditions of uncertainty, financial markets typically\nexperience a shift in sentiment towards risk-off, meaning investors tend\nto reduce exposure to assets deemed higher risk. Emerging market\nnations, including Indonesia, are often among the most affected as\npreviously inbound foreign capital flows can rapidly reverse.<\/p>\n
This situation triggers a phenomenon often called geopolitical\ncontagion, wherein the impact of conflict or tensions in one region\nspreads to global financial markets. International investors tend to\nredirect their funds towards instruments deemed safer, such as advanced\neconomy government bonds or assets denominated in US dollars.<\/p>\n
Consequently, stock markets in emerging markets face pressure from\ncapital outflows. For Indonesia, this condition can trigger volatility\nin the stock market whilst restraining the IHSG\u2019s potential\nstrengthening in the short to medium term.<\/p>\n
Secondly, growing concerns regarding Indonesia\u2019s position within\nglobal stock indices. Investor attention is also focused on the\npossibility of Indonesia\u2019s reclassification within global indices\ncompiled by Morgan Stanley Capital Index (MSCI).<\/p>\n
Currently, Indonesia\u2019s weight in the MSCI Emerging Markets Index\ncontinues to trend downwards and has approached approximately 1%. This\ndecline in weighting reflects the increasingly smaller share of\nIndonesia\u2019s stock market within global portfolios tracking such\nindices.<\/p>\n
A risk increasingly discussed among market participants is the\npotential for Indonesia to experience a downgrade in status from\nemerging market to frontier market classification.<\/p>\n
Although this scenario may not materialise in the near term,\ndiscussion of this possibility alone is sufficient to influence investor\nsentiment. Many global investment funds, particularly passive funds and\nETFs, automatically adjust their portfolios based on MSCI index\ncomposition. Should a country experience a reclassification change, the\ncapital flows tracking such indices would similarly shift. In an extreme\nscenario, such a status change could trigger significant foreign capital\noutflows from the domestic stock market.<\/p>\n
Thirdly, heightened attention to sovereign credit risk. Beyond\nexternal pressures and market classification issues, investors are\nmonitoring developments on the macroeconomic fundamentals side,\nparticularly regarding perceptions of government debt risk.<\/p>\n
Several international rating agencies including Fitch Ratings,\nMoody\u2019s Investors Service, and S&P Global Ratings have signalled\ncaution through more negative outlooks on Indonesia.<\/p>\n
Such outlook changes do not necessarily mean a downgrade in credit\nrating will occur in the near term. However, these signals indicate that\nrating agencies are beginning to perceive risks warranting attention,\nparticularly regarding fiscal conditions, government debt dynamics, and\npotential pressures on budget deficits in the future.<\/p>\n
For global investors, shifting perceptions of sovereign credit risk\ncan have broad impacts by affecting government financing costs as well\nas the corporate sector. If risk is perceived to be increasing,\ninvestors typically will demand higher yields to hold that country\u2019s\nassets.<\/p>\n
In the context of the stock market, heightened concern over sovereign\ncredit can similarly suppress market sentiment. Investors tend to become\nmore selective in deploying funds to domestic assets, such that IHSG\nmovements have the potential to become more constrained and sensitive to\nvarious policy developments and global conditions.<\/p>\n
Beyond the three reasons above, the intensifying Iran-Israel-United\nStates conflict has also driven global oil prices sharply upwards. This\nrisks causing significant inflation across almost all countries.<\/p>\n
Additionally, the rupiah\u2019s exchange rate against the US dollar\ncontinues to weaken, even breaking through the psychological level of Rp\n17,000 per dollar. The absence of positive sentiment suggests that\ndownward pressure on the IHSG is predicted to intensify going\nforward.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/this-is-why-the-ihsg-index-has-plummeted-5-2-to-the-7-156-level-1773034615", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }