Flooring Guide by Cinvex JAKARTA – The depreciation of the Rupiah and the exodus of foreign investors from the Indonesian stock market exerted significant pressure on the movement of the Jakarta Composite Index (IHSG) over the past week.
According to data from the Indonesia Stock Exchange (IDX) for the period of January 19-23, 2026, the IHSG saw a 1.37% decline, dropping from 9,075.40 to 8,951.01 within a single week. The composite index struggled to sustain its positive momentum after reaching a new all-time high (ATH) at the close of trading on Tuesday (January 20, 2026).
Following its ascent to a new ATH of 9,134, the IHSG consistently closed in the red zone for the subsequent three trading days. On Friday (January 23, 2026), the composite index concluded trading with a 0.46% slump, shedding 41.17 points.
Liza Camelia, Head of Equity Research at Kiwoom Sekuritas, explained that the Rupiah’s recent weakening, which saw it touch a historic low of around Rp16,985 per US dollar, ignited concerns among market participants regarding escalating domestic risks.
This weakening of the Rupiah was concurrently accompanied by a heightened perception of risk, particularly concerning the credibility of national economic policies. Investors viewed issues surrounding fiscal discipline and the independence of the central bank as key factors driving up the risk premium for Indonesian assets, ultimately putting pressure on both the stock and bond markets.
“The future direction of the IHSG will be more significantly determined by the stabilization of the Rupiah and the potential reversal of foreign capital flows, rather than solely by the narrative of economic growth, which, while fundamentally robust, is currently constrained by an elevated risk premium,” she stated on Friday (January 23, 2026).
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So far, Liza noted that Bank Indonesia’s decision to hold its benchmark interest rate at 4.75% was seen as effective in mitigating market panic. However, this measure has not yet proven sufficiently potent to restore a “risk-on” sentiment as long as foreign capital continues to exit the domestic market.
The pressure from capital outflows was notably pronounced this week. Bank Indonesia recorded foreign portfolio outflows reaching approximately US$1.6 billion by January 19, 2026.
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She further observed a noticeable acceleration in foreign investor outflows from the stock market over the past two to three days.
“This situation served as a pivotal catalyst for the IHSG’s decline, which was also perceived to be in an overbought territory after setting an all-time record high of 9,174,” she added.
Despite the turbulent market conditions, Indonesia’s macroeconomic foundations are still considered relatively solid. Bank Indonesia projects economic growth for 2026 to be in the range of 4.9%–5.7%, while for 2025, it is estimated at 4.7–5.5%.
Looking ahead to next week, she continued, global market participants’ attention will pivot towards the Federal Open Market Committee (FOMC) meeting, scheduled to take place on January 27–28, 2026.
The outcome of this crucial meeting, she emphasized, will be a primary determinant of global market risk appetite, especially for emerging economies. It will also directly influence the movement of US dollar yields, which in turn impacts both the Rupiah and the IHSG.
Beyond the FOMC, investors will also closely scrutinize the release of US inflation data based on Personal Consumption Expenditure (PCE), the Federal Reserve’s preferred inflation indicator. Additionally, economic activity data such as PMIs and developments from the global earnings season could potentially shift regional stock market sentiment.
Within the Asian region, attention will be drawn to Japan, specifically focusing on interest rate dynamics and the movements of Japanese Government Bonds (JGBs) and the Yen.
Domestically, market sentiment will hinge not only on economic data releases but also on the consistent communication of policies from both the government and monetary authorities. A steadfast commitment to fiscal discipline, the independence of Bank Indonesia, and concrete measures to stabilize the Rupiah through monetary instruments and market intervention are deemed crucial in determining Indonesia’s risk premium trajectory in the short term.
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