Attractive valuations, swift intervention by Indonesia's domestic financial regulators, and a gradual return of foreign capital have propelled the Indonesian stock market into a bull market after hitting a five-year low in early June.
Data from the London Stock Exchange Group shows that the Jakarta Composite Index is still down approximately 29% year-to-date, but it has surged more than 10% from last month's low, meeting the threshold for a bull market. Two weeks ago, Standard & Poor's Global Ratings affirmed Indonesia's sovereign credit rating at BBB with a stable outlook, further boosting market sentiment.
Mohit Mirpuri, a senior partner at SGMC Capital, stated: "S&P's affirmation of the rating removes a significant macro downside risk. Over the past month, market pricing logic has shifted from anticipating a deterioration in conditions to expecting stabilization."
Throughout most of 2026, the Indonesian stock market experienced volatile swings. Previously, MSCI questioned the governance standards of many listed companies in Indonesia and considered downgrading the market from emerging market to frontier market status. For example, many local companies have low free-float ratios and prominent issues with concentrated ownership.
Gareth Leather, a senior economist at Capital Economics, said that MSCI's eventual decision to postpone the market reclassification gave investors a major sigh of relief and curbed panic selling. He noted that investors have begun to take profits from overvalued artificial intelligence and technology stocks, instead seeking safer, low-valuation markets to allocate funds.
Liza Camelia, head of research at Indonesia's Future Securities, stated in an interview: "After months of massive sell-offs, Indonesian stock valuations have become extremely attractive and cannot be ignored by the market." Camelia added that the Indonesian government's fiscal revenue performance has been better than expected, with a significant rebound in first-half tax revenue. The market believes that fiscal risks may not be as severe as previously feared, easing investor sentiment.
Fang Zhimin, an assistant economist at Moody's Analytics, pointed out that new regulations introduced by Indonesian authorities—raising the minimum free-float requirement and tightening equity disclosure standards—help "improve the issue of weak market liquidity and address the transparency risks and equity concentration problems stemming from insufficient liquidity, which were precisely the factors that drove some investors to withdraw from the market."
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