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. The Managing Director of PT Samuel Tumbuh Bersama, Tae Yong Shim, stated that Bank Indonesia’s (BI) primary focus is currently on stabilising the rupiah exchange rate, with the BI-Rate having been raised by a total 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 rupiah’s attractiveness. However, the consequence is that economic growth has the potential to remain restrained. This is the market’s main dilemma, because stability needs to be maintained, but the room for growth also becomes more limited,’ Shim explained. He noted that the current rate-hiking cycle bears similarities to conditions in 2018, when rate hikes were implemented to dampen rupiah weakness and restore foreign investor confidence. ‘The main issue is not just the rate hike, but the reason behind it. When the market reads that rate hikes are being made by sacrificing growth for the sake of stability, investors will become more cautious towards risk assets,’ he added. Regarding the stock market, Shim assessed that from a valuation perspective, the market is beginning to offer more attractive entry points following a sharp correction. However, he cautioned that rising interest rates and policy risks mean the catalyst for a market recovery is not yet fully strong. He estimated that the heaviest pressure from the MSCI issue has likely passed, although uncertainty regarding attractiveness, free float, transparency, and a potential downgrade to frontier status remain factors that investors need to monitor closely. Head of Research Prasetya Gunadi added that the banking sector is still showing relatively resilient performance on an annual basis, though macro pressures are beginning to affect growth prospects. He warned that the combination of a weak rupiah and higher interest rates creates a less-than-ideal backdrop for the banking sector, as a higher interest rate environment typically drives up the cost of funds. If third-party funds reprice faster than productive assets, bank margins will remain under pressure, while higher borrowing costs could also affect debtor repayment capacity.