Cheap Assets, Investment Opportunities Emerge
Eighteen months after President Prabowo Subianto’s inauguration, Indonesia’s financial markets are facing considerable strain. The rupiah has weakened 15.6% against the US dollar since October 2024, the Jakarta Composite Index (IHSG) has fallen to its lowest valuation since the Covid-19 pandemic, and foreign ownership of government bonds has shrunk from around 23% to just 13%.
Despite this, Nicholas Hilman, Co-Founder of Simpan Asset Management, believes the situation does not yet reflect an economic crisis. He argues investors need to read the situation more clearly, as the current pressure is driven more by policy factors and capital flows than by a weakening of economic fundamentals.
“The market is reacting to policy uncertainty, not a fundamental collapse,” Nicholas said on Thursday (18/6).
According to Simpan Asset Management’s analysis, the main sources of pressure stem from the fiscal side and exchange rate stability. The government failed to achieve its 2025 state revenue target of Rp3,000 trillion, only realising about 91% of it. Meanwhile, state spending continues to rise, pushing the deficit-to-GDP ratio close to the minus 3% limit, a threshold only previously breached during the pandemic. Market attention is also focused on the Free Nutritious Meal Programme (MBG), whose budget has surged from Rp70 trillion in 2025 to Rp268 trillion in 2026, a sum now equivalent to the combined budgets of the Ministry of Defence and the National Police.
On the monetary side, Bank Indonesia has raised its benchmark interest rate by 75 basis points in just two months, signalling a shift in focus from supporting growth to maintaining stability. At the same time, foreign exchange reserves have declined from US$156 billion to US$145 billion due to interventions to defend the rupiah.
However, Nicholas stressed that the pressure is concentrated in the currency and capital flow sectors. The national economic foundation is considered relatively strong, with inflation under control and economic growth holding at around 5%. “What investors need to note is that this pressure is concentrated on the currency and capital flows, not on the economic foundation itself,” he said.
According to him, the sell-off by foreign investors in the stock market is largely influenced by exchange rate risk, governance uncertainty, and the removal of several stocks from the MSCI and FTSE global indices. These factors differ from conditions where market weakness is triggered by deteriorating corporate performance.
Amidst this pressure, Nicholas sees emerging investment opportunities. The IHSG valuation currently stands at a price-to-earnings ratio (P/E) of 14.5 times, a level that historically has often marked the beginning of a market recovery. “The IHSG valuation is currently at 14.5x P/E, a point that historically has been the start of a recovery, not further weakness,” he said.
This view underpins Simpan Asset Management’s portfolio strategy. Through its Actively Managed Portfolio (AMP) service, launched in January 2026, the company actively manages mutual funds across equities, bonds, and money markets. The firm claims that while the IHSG fell as much as 34.5%, its highest-risk portfolio recorded a correction of only around 12%. As stock valuations declined and became attractive in June, Simpan selectively increased its equity exposure.
The company also offers the Simpan Dollar Bond Fund (DBF) to hedge against long-term rupiah depreciation. Nicholas noted that over the past 15 years, the rupiah has depreciated by an average of about 5% per year, while domestic inflation has remained around 3%. This means rupiah-based investments must yield at least 8% annually just to match the US dollar’s value. The DBF therefore focuses on US dollar-denominated government and corporate bonds, targeting a net return of approximately 4.55% per year in that currency.
Nicholas views the two products as complementary rather than substitutes, aiming to create a balance between growth opportunities from rupiah-based assets and value protection through US dollar assets. Looking ahead, Simpan Asset Management sees the current situation as a phase of market dislocation that opens opportunities for disciplined investors with a long-term horizon.
“Simpan does not view the current conditions as a crisis. This is a dislocation that creates opportunities for investors with the right strategy and patience,” Nicholas said, reminding investors not to fall into the two extremes of panic selling at market lows or ignoring the real risks that remain. Investment decisions, he concluded, should be built on data and discipline, not mere speculation.