Pressure Not Fully Lifted, but Worst Conditions Likely Over - Ashmore
The Indonesia Stock Exchange ended the final trading session of June 2026 on Friday (26/6) with the JCI down 1.72% to 5,896, or 281 points lower than the previous week’s close of 6,177. Additionally, foreign investors recorded equity outflows of USD162 million over the past week.
In its weekly commentary, PT Ashmore Asset Management Indonesia noted that the sectors experiencing the largest declines over the past week were Basic Materials and Industrials, which fell by -11.19% and -7.41% respectively. Meanwhile, the best-performing sector was Healthcare, which surged 2.22%.
The best-performing markets this week were the Dow Jones Index (+0.69%) and US Treasuries (+0.38%). Conversely, there were corrections in crude oil prices (-9.98%) and the Hang Seng Index (-5.24%).
US economic growth (GDP) for the first quarter was revised upwards to 2.1% on an annualised quarter-on-quarter basis, higher than the previous survey of 1.6%, indicating the US economy is more resilient than initially estimated. Core PCE was in line with expectations at 0.3% month-on-month, while durable goods orders fell 4.5% after a strong increase the previous month. This suggests inflationary pressures persist, while business investment demand is beginning to normalise after a prior period of strengthening.
Canada’s headline inflation rose to its highest level since December 2023, while core inflation remained stable. In the Eurozone, consumer confidence improved slightly, continuing a gradual recovery in sentiment. Meanwhile, German consumer confidence edged up but was lower than expected, whilst the business climate index met expectations, indicating stabilising business sentiment.
In Asia, China’s foreign direct investment (FDI) contraction narrowed to -8.6% year-to-date year-on-year, better than the expected -11%, indicating that foreign investment pressures are beginning to ease. China’s Loan Prime Rate remained at 3.0%, showing the government is still maintaining an accommodative monetary policy but has not yet increased easing.
In Indonesia, M2 money supply growth increased, indicating continued liquidity expansion within the financial system.
Ashmore highlighted that the gradual increase in shipping activity through the Strait of Hormuz this week pushed oil prices down close to pre-conflict levels, even briefly dropping to around USD72 per barrel. This condition helped improve global appetite for risk assets, as the risk of prolonged energy-driven inflationary pressures began to diminish.
However, investors remain cautious as geopolitical risks have not fully disappeared. Oil prices rose again following reports of an oil tanker coming under attack. Ashmore observed that the market narrative is now shifting from concerns about the impact of a prolonged war towards the risks and path of normalisation. The worst situation has likely passed as trade flows through the Strait of Hormuz improve, but investors are still waiting for confirmation that shipping routes, insurance conditions, and security have truly returned to normal.
If oil prices can hold at current levels, inflation concerns could potentially ease further. However, fragile geopolitical conditions mean the risk of oil price spikes could re-emerge if new incidents occur, which would again pressure risk assets. The current lower oil prices support inflation expectations, but market expectations for the Fed’s interest rate decision this year still lean towards a rate hike. Based on CME FedWatch, the probability of a rate hike by year-end stands at around 76%.
Ashmore assessed that the market is still scrutinising economic indicators that could influence the Fed’s decision at upcoming meetings. US yields and the US dollar remain sensitive to surprises in inflation or labour data.
In Indonesia, the long-awaited MSCI announcement finally arrived, but there was no critical decision in this month’s review. Ashmore noted that MSCI’s main message was acknowledging various initiatives such as the HSC framework and shareholder information disclosure. Nevertheless, Ashmore observed that concerns related to opaque share ownership structures and coordinated trading behaviour remain areas of focus. Policy implementation and sustainable outcomes will continue to be monitored.
Indonesia remains categorised as an Emerging Market, thus immediate concerns about a potential downgrade to Frontier Market status have eased. However, follow-up action from MSCI is still awaited in November.
Ashmore opined that the current global environment remains highly dependent on geopolitical developments, particularly trade flows through the Strait of Hormuz. Interest in global risk assets improved over the past week, but investors still see vulnerabilities and will only increase risk exposure if there is evidence of more sustainable normalisation.
The latest MSCI announcement has not fully removed the pressure on Indonesian equities, but the worst conditions are likely over. The current strategy remains selective towards stocks with strong fundamentals and highly liquid bonds.