This Is Why The IHSG Index Has Plummeted 5.2% To The 7,156 Level

The Composite Stock Index (IHSG) collapsed this morning, Monday 9 March 2026, touching its lowest level at minus 5.2% to the 7,156 mark. A total of 449 stocks declined, 57 rose, and 158 remained unchanged with transaction value reaching Rp 1.5 trillion.

Over the past week, the IHSG plummeted nearly 8% in just one week, marking the worst performance exceeding the MSCI crash of late January. There are three principal causes behind the movement in Indonesia’s stock market.

In recent times, the IHSG has not only been influenced by domestic factors but also by external pressures and changes in global investor perception towards Indonesia as an investment destination.

Escalating geopolitical tensions, particularly in the Middle East region, have prompted global investors to adopt a more defensive stance. In such conditions of uncertainty, financial markets typically experience a shift in sentiment towards risk-off, meaning investors tend to reduce exposure to assets deemed higher risk. Emerging market nations, including Indonesia, are often among the most affected as previously inbound foreign capital flows can rapidly reverse.

This situation triggers a phenomenon often called geopolitical contagion, wherein the impact of conflict or tensions in one region spreads to global financial markets. International investors tend to redirect their funds towards instruments deemed safer, such as advanced economy government bonds or assets denominated in US dollars.

Consequently, stock markets in emerging markets face pressure from capital outflows. For Indonesia, this condition can trigger volatility in the stock market whilst restraining the IHSG’s potential strengthening in the short to medium term.

Secondly, growing concerns regarding Indonesia’s position within global stock indices. Investor attention is also focused on the possibility of Indonesia’s reclassification within global indices compiled by Morgan Stanley Capital Index (MSCI).

Currently, Indonesia’s weight in the MSCI Emerging Markets Index continues to trend downwards and has approached approximately 1%. This decline in weighting reflects the increasingly smaller share of Indonesia’s stock market within global portfolios tracking such indices.

A risk increasingly discussed among market participants is the potential for Indonesia to experience a downgrade in status from emerging market to frontier market classification.

Although this scenario may not materialise in the near term, discussion of this possibility alone is sufficient to influence investor sentiment. Many global investment funds, particularly passive funds and ETFs, automatically adjust their portfolios based on MSCI index composition. Should a country experience a reclassification change, the capital flows tracking such indices would similarly shift. In an extreme scenario, such a status change could trigger significant foreign capital outflows from the domestic stock market.

Thirdly, heightened attention to sovereign credit risk. Beyond external pressures and market classification issues, investors are monitoring developments on the macroeconomic fundamentals side, particularly regarding perceptions of government debt risk.

Several international rating agencies including Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings have signalled caution through more negative outlooks on Indonesia.

Such outlook changes do not necessarily mean a downgrade in credit rating will occur in the near term. However, these signals indicate that rating agencies are beginning to perceive risks warranting attention, particularly regarding fiscal conditions, government debt dynamics, and potential pressures on budget deficits in the future.

For global investors, shifting perceptions of sovereign credit risk can have broad impacts by affecting government financing costs as well as the corporate sector. If risk is perceived to be increasing, investors typically will demand higher yields to hold that country’s assets.

In the context of the stock market, heightened concern over sovereign credit can similarly suppress market sentiment. Investors tend to become more selective in deploying funds to domestic assets, such that IHSG movements have the potential to become more constrained and sensitive to various policy developments and global conditions.

Beyond the three reasons above, the intensifying Iran-Israel-United States conflict has also driven global oil prices sharply upwards. This risks causing significant inflation across almost all countries.

Additionally, the rupiah’s exchange rate against the US dollar continues to weaken, even breaking through the psychological level of Rp 17,000 per dollar. The absence of positive sentiment suggests that downward pressure on the IHSG is predicted to intensify going forward.