Jakarta Composite Index Plummets 3.49% to 7,321 Level in Morning Session

The Jakarta Composite Index (IHSG) plummeted during trading on Monday, 9 March 2026. The IHSG briefly touched a low of minus 5.2% at the 7,156 level but subsequently trimmed losses to minus 3.49%, shedding 264 points to close at 7,321.07.

A total of 717 shares declined, 63 advanced, and 36 remained unchanged, indicating intense selling activity in the domestic equity market. Transaction value reached Rp13.94 trillion, involving 31.15 billion shares across 1.61 million transactions.

All trading sectors weakened, with the deepest corrections recorded in the industrial and non-essential consumer sectors. Large-capitalisation blue-chip shares served as the primary drag on IHSG performance, with BBCA, BYAN, TLKM, BMRI, and BREN shares bearing the brunt of selling pressure.

Over the past week, the IHSG has plummeted nearly 8% in just seven days, marking the worst weekly performance exceeding the MSCI crash of late January. Three primary factors are driving the Indonesian equity market’s sharp decline.

In recent times, the IHSG has been influenced not only by domestic factors but also by external pressures and shifts in global investor perception regarding Indonesia as an investment destination.

Escalating geopolitical tensions, particularly in the Middle East, have prompted global investors to adopt a more defensive stance. In such conditions of uncertainty, financial markets typically experience a shift in sentiment towards risk-off positioning, wherein investors tend to reduce exposure to assets perceived as riskier.

Developing nations, including Indonesia, frequently find themselves most affected as foreign capital inflows that previously entered the market can rapidly reverse direction. This situation triggers what is commonly termed geopolitical contagion, wherein the impact of conflict or tensions in one region spreads across global financial markets. International investors tend to relocate funds to instruments deemed safer, such as government bonds from developed nations or US dollar-denominated assets.

Consequently, emerging market equity markets face outward capital flow pressures. For Indonesia, such conditions can trigger volatility in the equity market whilst constraining potential IHSG strengthening in the short to medium term.

Secondly, heightened concerns regarding Indonesia’s position within global equity indices are weighing on sentiment. Investor attention is also focused on the possibility of Indonesia’s reclassification within global indices compiled by Morgan Stanley Capital Index (MSCI).

Currently, Indonesia’s weighting within the MSCI Emerging Markets Index continues on a downward trajectory and has already approached the 1% threshold. This weighting reduction reflects the diminishing proportion of Indonesian equity market value within global portfolios tracking such indices.

A risk increasingly being discussed amongst market participants is the potential for Indonesia to experience a downgrade from emerging market to frontier market status.

Although this scenario may not occur in the near term, mere discussion of such a possibility is sufficient to influence investor sentiment. Many global investment funds, particularly passive funds and exchange-traded funds, automatically adjust their portfolio composition based on MSCI index composition.

Should a country experience a classification change, the capital flows tracking such indices would also shift accordingly. In an extreme scenario, such a status change could trigger significant foreign capital outflows from the domestic equity market.

Thirdly, heightened attention towards sovereign credit risk is affecting markets. Beyond external pressures and market classification concerns, investors are also monitoring macroeconomic fundamentals, particularly regarding perceptions of government debt risk.

Several international rating agencies, including Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings, have issued cautionary signals through negative outlook revisions on Indonesia.

These outlook changes do not necessarily herald imminent rating downgrades. However, the signals indicate that rating agencies are beginning to identify risks warranting attention, particularly concerning fiscal conditions, government debt dynamics, and potential pressures on budget deficits going forward.

For global investors, shifting perceptions of sovereign credit risk can have broad implications as they affect both government and corporate funding costs. Should risk be perceived as rising, investors typically demand higher returns to hold that nation’s assets.

Within the equity market context, mounting sovereign credit concerns can also suppress market sentiment. Investors tend to become more selective in deploying capital into domestic assets, potentially resulting in more limited and volatile IHSG movements that are increasingly sensitive to policy developments and global conditions.

Beyond these three factors, the intensifying Iran-Israel-United States conflict is also driving global oil prices sharply higher. This threatens to spark significant inflation across virtually all nations. Additionally, the Indonesian rupiah has continued weakening against the US dollar, even breaching the psychological level of Rp17,000 per dollar. The absence of positive sentiment is expected to intensify downward pressure on the IHSG in the coming period.