IHSG Cheapest in Asia: Time to Scoop Up or Wait Longer?
The Composite Stock Price Index (IHSG) has plunged nearly 25% from its peak this year. As a result, its valuation has become the cheapest in Asia. Is this an attractive moment for accumulation?
From the following data, it is evident that the IHSG, or Indonesia’s stock exchange, is currently viewed as undervalued by the world, at least in the Asia-Pacific region.
While some countries like Taiwan are starting to appear expensive, the IHSG’s valuation is at a level rarely seen in its history.
In simple terms, the IHSG’s current valuation is around 10.2 times for the projected earnings over the next 12 months. This figure is not the most striking. However, what draws attention is its position relative to the historical average.
With a Z-Score of around -2.2, this means Indonesia’s stock market valuation is far below the 10-year average. In plain language, the IHSG is being traded at a fairly deep discount compared to usual.
Explanation:
P/E (Price to Earnings Ratio): The ratio of share price to company earnings
P/B (Price to Book Value): The ratio of share price to book value
f12m (forward 12 months): Projected performance for the next 12 months
f24m (forward 24 months): Projected performance for the next 24 months
LTM (Last Twelve Months): Historical data for the last 12 months
Z-Score: A measure of how far the current valuation is from the historical average (in standard deviations)
To make it easier to understand, imagine this situation like an apartment in a strategic location.
For years, its average price has been around Rp1 billion. But now, the same unit is offered for only about Rp700 million.
Not because its quality has declined, but because the market situation is currently unfavourable, such as global pressures, high interest rates, or outflows of foreign funds.
In such conditions, some people might choose to wait. However, for investors who look at it from a valuation perspective, this situation appears as an opportunity.
This is the phenomenon that global investors are currently observing. Compared to other countries in the Asian region, Indonesia is not only cheap but also one of the most discounted relative to its own historical average.
In contrast, markets like Taiwan are in a different position. Its current valuation is already above the historical average, reflecting high growth expectations and more positive sentiment from investors.
This difference creates a fairly stark contrast. On one side, there are markets priced at a premium. On the other, markets like Indonesia are in a “less favoured” phase, causing valuations to drop quite deeply.
In conclusion, the IHSG currently not only looks cheap compared to other Asian markets but is also being traded far below its fair value in a historical context.
The question now is whether this condition represents an opportunity for investors or reflects risks that still need to be wary of?
In the short term, selling pressure may still occur, considering that until May 2026, there are still technical issues, particularly regarding ownership transparency and free float, which will be further discussed by the regulator, in this case the Indonesia Stock Exchange (BEI) and the Financial Services Authority (OJK), together with MSCI starting next month.
The outcome of that meeting will later serve as material for MSCI to decide whether Indonesia remains an emerging market or is downgraded to a frontier market.
Therefore, market participants remain cautious if selling pressure continues.
Nevertheless, the current moment also becomes an opportunity for us to look at value stocks, especially those with a track record of consistent dividends and healthy fundamentals.
The turmoil over transparency and geopolitical risk pressures should remind us that markets are not always rational in the short term. Sentiment can change quickly, prices can fall deeper than they should, and investor decisions are often influenced by fear rather than just data.
In such a phase, stocks with strong fundamentals are usually dragged down as well, even though their performance has not changed much. This is often referred to as “mispricing,” when market prices do not fully reflect true value.
For more patient investors, this condition opens up space to start accumulating gradually. The focus is no longer just chasing momentum but seeking companies with stable cash flows, managed debt, and the ability to distribute dividends consistently.
Additionally, dividends can serve as a “buffer” amid volatility. When share prices have not yet risen, investors still receive returns from profit sharing. This makes value investing strategy feel more defensive compared to simply hunting for rising stocks.
Ultimately, phases like the current market often become both a test and an opportunity. A test to remain disciplined and not get carried away by emotions, as well as an opportunity for those who dare to look beyond short-term sentiment.