JCI Hit by MSCI Rebalancing and Rupiah Weakness in May 2026; Investors Advised to Adopt Defensive Stance
The Jakarta Composite Index (JCI) is predicted to face pressure ahead of the long holiday in May 2026. In the short term, the index is likely to move with volatility and a sideways bearish tendency.
Capital market observer and Founder of Republik Investor, Hendra Wardana, noted that the market is still in an adjustment phase following significant pressure on large-cap stocks caused by the May 2026 MSCI rebalancing.
“The weakening of the JCI ahead of the long holiday reflects a combination of simultaneous global and domestic pressures. In the short term, the JCI movement remains potentially volatile with a sideways bearish tendency, primarily because the market is still in an adjustment phase following heavy pressure on large-cap stocks due to the May 2026 MSCI rebalancing,” Hendra told Kompas.com on Sunday night (17/5/2026).
However, the deep correction currently occurring is also beginning to present opportunities for a technical rebound, particularly if global pressures subside and the Rupiah exchange rate stabilises. According to Hendra, the main factors affecting the JCI include foreign capital outflows, the weakening Rupiah, concerns over a global economic slowdown, and high levels of global geopolitical uncertainty.
The market is also closely monitoring the direction of the US Federal Reserve’s interest rate policy amidst US inflation that has not yet fully subsided. Additionally, falling global commodity prices and concerns regarding the impact of the US-China tariff war are exerting further pressure on export-oriented and commodity-based stocks.
From a domestic perspective, the market currently lacks strong positive sentiment, making the JCI more sensitive to external pressures. Hendra explained that the May 2021 MSCI rebalancing has been one of the most dominant factors triggering significant market pressure in recent weeks.
The removal of stocks such as PT Amman Mineral Internasional Tbk (AMMN), PT Barito Renewables Energy Tbk (BREN), PT Chandra Asri Pacific Tbk (TPIA), PT Dian Swastatika Sentosa Tbk (DSSA), PT Petrindo Jaya Kreasi Tbk (CUAN), and PT Sumber Alfaria Trijaya Tbk (AMRT) from the MSCI Global Standard Index could trigger residual passive selling estimated to reach approximately Rp 18.5 trillion by the end of May.
“The greatest pressure stems from the mechanism of global passive fund outflows, which must adjust portfolios according to the MSCI index composition. Consequently, stocks facing deletion face massive mechanical selling pressure without regard for valuation or short-term fundamentals,” he explained.
The greatest risk is not merely price declines, but also high volatility due to the relatively limited free float in some of these stocks. When passive funds execute exits simultaneously, the potential for slippage and panic selling increases significantly. Therefore, stocks with high ownership concentration and shallow market liquidity remain at risk of further pressure, even if their valuations appear to have corrected significantly.