IHSG Valuation at Crisis Levels, 7,500 Target by End of 2026, Here Are the Stock Recommendations

UOB Kay Hian, in a strategy report titled ‘Crisis-level Valuations Present Attractive Risk-Reward’ published on 26 June 2026, stated that IHSG valuations are now at crisis levels, with a forward P/E of 9.8x, the lowest since the COVID-19 pandemic and approaching levels seen during the Global Financial Crisis. The IHSG is also trading at a significant discount to Indonesia’s 15-year historical average of 15.2x, as well as below the Southeast Asian regional average. Despite ongoing market pressure, UOB Kay Hian believes the risk-reward profile for investing in the Indonesian stock market is becoming increasingly attractive. The firm set an IHSG target of 7,500 for the end of 2026, based on a 12x forward P/E projection for 2026, equivalent to the three-year average, with an assumed earnings per share growth of 8.3 per cent. The investment thesis is built on three main pillars. First, valuations already reflect worst-case scenarios, with major banks like BBCA and BBRI trading near their lowest price-to-book levels since the 2008 crisis, while BMRI and BBNI offer dividend yields of 6–10 per cent. Second, potential catalysts for a re-rating include external factors such as clarity on MSCI Emerging Market status and easing geopolitical tensions, as well as internal factors like improved fiscal and monetary policy credibility and a recovery in real-sector liquidity. UOB Kay Hian noted that Indonesia’s weight in the MSCI Emerging Markets index has fallen to around 0.4 per cent from a peak of 3.0 per cent a decade ago, one of the steepest declines among Asian EM countries. Third, the firm advocates selective accumulation, recommending a portfolio balanced between banking, commodity, and defensive stocks to provide resilience against macro and policy uncertainties. Key risks identified include further rupiah depreciation forcing a higher BI Rate, a downgrade of Indonesia’s sovereign rating, fiscal slippage on energy and food subsidies, rising oil prices, and negative developments from MSCI. UOB Kay Hian assigned an Overweight rating to the Healthcare, Oil & Gas, Plantation, and Property sectors, reflecting a preference for sectors with higher earnings visibility and lower exposure to government intervention risk. The Banking, Consumer, Mining, Cement, Telecommunications, and Automotive sectors were rated Market Weight. The firm concluded that the Indonesian stock market is priced for the worst, with a crisis-level forward P/E of 9.8x providing a significant margin of safety for medium-term investors. The 7,500 end-2026 IHSG target reflects a potential upside of approximately 25 per cent from current levels, with main catalysts including improved policy credibility, MSCI certainty, and liquidity recovery in the real sector, though sustained recovery requires consistent policy execution and macro stability.