Indonesia's Stock Market: Strong Fundamentals, Yet Shaken by Sentiment

Jakarta, CNBC Indonesia - The capital market is not merely a venue for financial transactions, but a direct reflection of the credibility and fundamentals of a country’s economy. Within the equity exchange, the pulse of the national economy is reflected, driven by a range of entities, from private corporations to state-owned enterprises (SOEs). This fundamental view was stressed by Mukhamad Misbakhun, Chairman of Commission XI of the Indonesian House of Representatives, at the CNBC Indonesia Market Outlook 2026 forum yesterday, Tuesday (3 March 2026), in the Main Hall of the Indonesia Stock Exchange. As the head of a commission overseeing finance and banking, Misbakhun noted that in an era of increasingly globalised integration, the financial sector possesses an extreme sensitivity. Even the slightest issue, even elemental ones, can immediately influence perceptions and investment decisions. Therefore, maintaining the credibility and integrity of the Indonesia Stock Exchange is a price that must be paid. Misbakhun considers that institutional governance in Indonesia today is already very good. Where there is a clear separation of powers between the fiscal sector (Ministry of Finance), monetary (Bank Indonesia), and financial supervision (Financial Services Authority (OJK)). Yet, this good governance must still be tested in the face of market anomalies. Paradigm of Fundamentals and the “Our Brand in the Crisis” Bet One of Misbakhun’s sharpest points is the paradox between the strength of domestic macroeconomic fundamentals and the vulnerability of financial markets to sentiment pressure. Objectively, Indonesia’s economic fundamentals are said to be very solid. Economic growth has consistently remained above 5% for a long period. The country also holds strong foreign exchange reserves, a trade balance that has recorded a sustainable surplus, and a positive current account. The only component with a deficit is the state budget (APBN). However, field reality shows that even such a strong foundation often wobbles merely due to momentary sentiment. Misbakhun cites how political transition from the era of President Joko Widodo to President Prabowo Subianto occurred. In addition, when leadership changes at the Ministry of Finance occur, it is often cited as a reason for markets to respond reactively. This pressure is compounded by global sentiment and ratings agencies such as MSCI, Moody’s or Fitch. “Imagine our economy’s fundamentals are so strong yet still influenced by sentiment. The stock market, the government securities market (SBN), and the rupiah exchange rate are three elements of Indonesia’s economic strength. When these three are pressured by global sentiment, our brand is in the crisis. We are gambling with Indonesia’s name. This requires very strong communication to reassure investors,” Misbakhun said. Sharp Critique of Free Float Practices and Illusory Valuation Turning to market-technical issues, Misbakhun openly explained why he is one of the most vocal proponents of raising the public free float to 15%. He argued that the stock market is a vehicle for corporations to obtain financing or cheap funds, where issuers do not have to pay interest or administration costs as with banking credit, but simply distribute dividends from company performance. However, he sharply criticised anomalies that often occur when a firm conducts an Initial Public Offering (IPO). Not few companies only release a very small stake to the public, around 5-7.5%. This small stake is then traded by the public daily, forming a price or valuation on the exchange. Ironically, the market valuation formed from that 5% stake is then used by controlling shareholders (owning 90-95% of shares) as wealth profiling to be pledged (repo) to banks or securities to raise funding into trillions of rupiah. “The public that sets the price at 5-10% only receives a very small dividend. This must be made fairer. Do not let the stock market be able to set prices, but the greatest benefits go only to the majority shareholders. Increasing the free float threshold is important so that the wider public can better enjoy the growth of these corporates,” he said. To support a larger free float up to 15%, Misbakhun also urged optimal participation from domestic institutional investors, such as pension funds, insurance, and private banking, to keep market liquidity from drying up. Urgency of Demutualisation and Transaction Tax Relaxation As part of integrity reform, Commission XI of the DPR also highlights the urgency of demutualising the Indonesia Stock Exchange. The credibility of an exchange depends heavily on the independence of its operator. Misbakhun stressed that the exchange should not be operated by parties with direct conflicts of interest. “Demutualisation will be carried out. What will the concept be? For now our exchange is owned by securities companies that are members. We must separate that the exchange’s shareholders must be independent, so that there is no perception that price formation is being controlled by the exchange operator,” Misbakhun asserted. In addition to structural reforms, Misbakhun also floated a bold fiscal idea, namely relief from stock transaction taxes. Currently, the levy of a final tax on transactions in the exchange is viewed as the simplest mechanism. However, Misbakhun believes that when the economy or stock market is under heavy pressure, the tax authority should not view rate relief as taboo. “Abroad, when under pressure, tax rates are lowered to give a push to the economy, which ultimately will increase the tax base itself. For industries that are currently but