JCI Continues to Weaken as Analysts Explain the Causes

Jakarta, CNBC Indonesia — Analysts have explained why the Jakarta Composite Index (JCI) has continued to correct. The index remains under pressure and has recorded a significant decline this week, falling 7.48% cumulatively.

They said the weakness in the domestic equity market reflects a combination of external and domestic factors, including uncertainty over the direction of US interest-rate policy, rising bond yields and investor concerns about Morgan Stanley Capital International’s (MSCI) review of Indonesia’s capital market.

Handiman, managing director of Solstice Indonesia, said one external factor weighing on the market was growing concern about the direction of the US Federal Reserve’s monetary policy.

Although the US central bank decided to hold interest rates, the decision was not unanimous. Two Fed officials openly backed a 25-basis-point rate rise, citing persistently high US inflation.

That prompted markets to reassess the outlook for US monetary policy. The probability of a Fed rate rise in December was estimated at 80%, bringing the prospect of “higher for longer” interest rates back into focus for investors.

“Although rates were held, the FOMC decision was not unanimous. Two Fed officials openly backed a 25-basis-point rise because US inflation is considered still high,” Handiman said.

The rise in US Treasury yields, which reached 5.042%, has also made assets in emerging markets, including Indonesia, less attractive. This has encouraged investors to move funds back to the United States.

External pressure has also come from an escalation in geopolitical tensions, which has again disrupted the outlook for global energy supplies. Houthi attacks on Saudi Arabian oil refinery facilities were said to have raised concerns about global crude oil supplies.

Brent crude prices surged above US$110 a barrel. Higher energy prices could add to global inflationary pressure and increase Indonesia’s fiscal burden through higher energy costs and subsidies.

Domestically, Handiman said several factors had intensified pressure on the JCI. One was the risk that MSCI could downgrade Indonesia’s equity market from emerging-market to standalone-market status.

The uncertainty has drawn the attention of foreign investors because it could affect perceptions of the quality and attractiveness of Indonesia’s capital market.

Pressure has also come from the rupiah’s depreciation, which at one point reached Rp18,185 per US dollar. A weaker rupiah further increases the risks faced by foreign investors holding domestic assets.

In addition, a plan to exclude HSC shares from the JCI calculation from 2 November has raised the prospect of large-scale portfolio adjustments, or rebalancing, by investment managers.

“Government bond yields have surged to around 7.6%, their highest level since late 2022. This rise reflects a heightened perception of fiscal risk and makes equities less competitive than the domestic bond market,” Handiman told CNBC Indonesia on Friday (30 October 2026).

Meanwhile, capital-market observer Elandry Pratama said the JCI’s current correction could not be attributed solely to the Fed’s decision to hold interest rates. In his view, that decision was relatively positive for global markets, but was not enough to remove pressure stemming from domestic factors.

One of the main issues is uncertainty surrounding MSCI’s review, particularly its assessment of share-ownership transparency and the investability of Indonesia’s market.

This has led some foreign investors to adopt a wait-and-see approach and exercise greater caution when placing funds in the domestic equity market.

The pressure is reflected in continued net foreign selling. On 29 October, foreign investors recorded net sales of around Rp1.52 trillion on the regular market.

Selling has also been significant in large-cap stocks, particularly in banking, including PT Bank Central Asia Tbk. (BBCA), PT Bank Rakyat Indonesia (Persero) Tbk. (BBRI) and PT Bank Mandiri (Persero) Tbk. (BMRI).

Elandry added that the Fed’s decision to keep rates unchanged was not a strong enough catalyst to reverse the JCI’s direction. Investors are still monitoring the outlook for US monetary policy, inflation developments and the US dollar’s movements.

“So, I see the JCI’s current correction as a combination of capital outflows, rupiah pressure and a rising risk premium on the domestic market,” Elandry told CNBC Indonesia on Friday (30 October 2026).

He said the JCI was likely to remain highly volatile until foreign fund flows returned and investor confidence recovered.