Three Opposing Forces Loom Over Indonesia: MSCI Review, Trade War, and BI Rate Impact

Indonesia’s financial markets closed mixed on Thursday (18/6/2026), with the stock exchange and government bonds (SBN) weakening after Bank Indonesia raised its benchmark interest rate by 25 basis points to 5.75%, while the rupiah managed to strengthen slightly after months of depreciation. The Jakarta Composite Index (IHSG) ended the session in the red, down 48.3 points or 0.78% to 6,172.34, paring losses after plunging as much as 2% earlier in the day. A total of 445 stocks declined, 271 advanced, and 243 were unchanged, with transaction value reaching Rp 17.95 trillion. Foreign investors recorded a net outflow of Rp 111.31 billion across all market transactions. The biggest laggards included Bank Rakyat Indonesia (BBRI), Telkom Indonesia (TLKM), and Bank Central Asia (BBCA). Market sentiment was weighed down by anticipation of the MSCI Global Market Accessibility Review, released early Friday, and the upcoming MSCI Annual Market Classification Review on 24 June. The latter will determine whether Indonesia retains its Emerging Market status or faces a downgrade to Frontier Market, a fear that has gripped investors since MSCI issued a transparency notice in January. The rupiah managed to reverse its weakening trend, closing 0.17% stronger at Rp 17,700 per US dollar, after opening sharply lower at Rp 17,840. The currency’s recovery came after Bank Indonesia Governor Perry Warjiyo announced the rate hike, part of a pre-emptive strategy to stabilise the exchange rate and keep inflation within the 2.5±1% target range for 2026 and 2027. This marks the third rate increase in a month, totalling 100 basis points. In the bond market, the yield on 10-year government bonds rose to 6.968%, indicating selling pressure. Meanwhile, Wall Street rebounded strongly, with the S&P 500 surging 1.08%, the Nasdaq gaining 1.91%, and the Dow Jones adding 0.14%, as investors shrugged off the Federal Reserve’s hawkish stance. Intel shares jumped 10.6% on news of a partnership with Apple to design chips in the US.