Samuel Sekuritas Flags Rupiah Pressure, Rate Hikes as Key H2-2026 Challenges

Entering the second half of 2026, the market remains overshadowed by a combination of Rupiah pressure, rising yields, and policy uncertainty. Key challenges facing the Indonesian financial market include the weakening Rupiah, rising bond yields, the interest rate hike cycle, and the direction of domestic policy.

“Entering the second half of 2/2026, the market is still shadowed by a combination of Rupiah pressure, rising yields, and policy uncertainty. In such a situation, an overly aggressive strategy may not necessarily be the best choice. Therefore, a defensive approach is becoming increasingly important,” said Tae Yong Shim, Managing Director of PT Samuel Tumbuh Bersama, during Media Connect in Jakarta on Friday.

Shim explained that Bank Indonesia’s (BI) primary focus is currently on stabilising the Rupiah exchange rate, following a total BI-Rate increase of 100 basis points, from 4.75 per cent in March 2026 to 5.75 per cent in June 2026.

“BI raised interest rates to maintain the attractiveness of the Rupiah. However, the consequence is that economic growth potentially remains constrained. This is the market’s main dilemma, as stability needs to be maintained, but the space for growth also becomes more limited,” Shim explained.

According to Shim, the current interest rate hike cycle bears similarities to the conditions in 2018, when rate hikes were implemented to curb Rupiah depreciation and restore foreign investor confidence.

“The main issue is not just the interest rate hike, but the reason behind it. When the market perceives that interest rate hikes are being implemented to sacrifice growth for the sake of stability, investors will become more cautious regarding risky assets,” said Shim.

Regarding the stock market, the firm assesses that from a valuation perspective, the Indonesian stock market is beginning to offer more attractive entry points following a sharp correction. However, he explained that rising interest rates and policy risks mean the catalysts for market recovery are not yet fully robust.

“We expect the greatest pressure from the MSCI issue may have passed, although uncertainty regarding attractiveness, free float, transparency, and the frontier market downgrade remains a factor that investors must continue to monitor,” said Shim.

Meanwhile, Prasetya Gunadi, Head of Research at Samuel Sekuritas Indonesia, noted that the banking sector continues to show relatively resilient year-on-year performance, even though macro pressures are beginning to affect growth prospects.

“On a year-on-year basis, bank performance still appears resilient. However, investors need to look further into the second half of this year, as pressure from high interest rates, the weakening Rupiah, and the potential rise in credit costs remain challenges for the banking sector,” said Praselya.

Prasetya stated that the combination of a weak Rupiah and higher interest rates provides a less than ideal backdrop for the banking sector.

“A higher interest rate environment usually drives up the cost of funds. If the repricing of third-party funds moves faster than productive assets, bank margins will remain under pressure. At the same time, higher borrowing costs may also affect the ability of debtors to repay,” added Prasetya.