Indonesia's IDX Composite Plunges 34.7% in H1 2026 as Rupiah Breaches 18,000
Updated
Updated · The Star Online · Jul 20
Indonesia's IDX Composite Plunges 34.7% in H1 2026 as Rupiah Breaches 18,000
1 articles · Updated · The Star Online · Jul 20
Summary
A 34.7% first-half slump made Indonesia’s IDX Composite the worst-performing stock index in Asia, as capital flight accelerated ahead of MSCI’s final market-status review in November.
MSCI’s March review flagged opaque ownership, low public floats and suspected coordinated trading, and it already removed several Indonesian companies from its indexes.
The selloff has coincided with a sharp rupiah slide above 18,000 per dollar even after Bank Indonesia raised rates by 100 basis points in a month to 5.75%, underscoring limits of monetary tightening when confidence breaks.
Investor trust has been further hit by President Prabowo Subianto’s controversial policy mix and a new law amendment that shields buyers of Danantara’s Red and White bonds from prosecution, lawsuits and tax scrutiny.
A downgrade from emerging to frontier market could force active MSCI EM funds to exit Indonesia and passive funds to cut exposure sharply, draining liquidity and making capital raising harder.
With an MSCI downgrade looming, can Indonesia reform its markets in time to avert a catastrophic capital exodus?
As a new law shields bond investors from prosecution, is Indonesia sacrificing financial integrity for short-term capital?
With its currency collapsing, is Indonesia's government manufacturing a repeat of the 1997 Asian financial crisis?
Indonesia’s 2026 Financial Crisis: Causes, Market Fallout, and Lessons for Emerging Economies
Overview
By mid-2026, Indonesia’s financial markets were in turmoil, triggered by pivotal policy shifts and fiscal challenges that began in late 2025. The abrupt replacement of Finance Minister Sri Mulyani Indrawati with Purbaya Yudhi Sadewa led to a controversial move: transferring government reserves from the central bank to state-owned banks, despite already high liquidity. This policy unsettled investor confidence and set off a chain reaction, contributing to a worsening crisis. The situation was further strained as Indonesia ended 2025 with a fiscal deficit higher than targeted, deepening uncertainty and fueling the market volatility seen in 2026.