The Composite Stock Price Index (IHSG) faced significant downward pressure during Monday’s trading session (May 18). According to RTI Business data at 10:33 WIB, the index plunged by 288.024 points, or 4.28 percent, settling at 6,435.295. Market breadth reflected this bearish sentiment, with 676 stocks declining, while only 70 advanced and 67 remained stagnant.
Myrdal Gunarto, a Global Markets Economist at Maybank Indonesia, noted that the volatility is not isolated to Indonesia but is a widespread trend across emerging markets. Gunarto explained that global investors are increasingly wary of the US Federal Reserve’s monetary policy trajectory. Persistent inflation, which has hit 3.8 percent year-on-year in the US, has fueled speculation that the Fed may keep interest rates elevated or even hike them further. Consequently, global capital is shifting away from emerging markets and back into US dollar-denominated assets.
Adding to the market strain is the rising price of oil, driven by heightened geopolitical tensions. This, combined with a strengthening US dollar—which has pressured major Asian currencies—has triggered a wave of profit-taking across regional stock exchanges. Despite the broader market decline, Gunarto highlighted that some sectors remain resilient. Specifically, the healthcare sector shows potential for recovery, while renewable energy, oil and gas, and undervalued commodities like palm oil and coal continue to draw investor interest. Defensive, consumer-staple sectors also remain relatively stable amidst the current market turbulence.
Senior Technical Analyst at Mirae Asset Sekuritas Indonesia, M. Nafan Aji Gusta, emphasized that global uncertainty, particularly regarding Middle Eastern geopolitical conflicts, remains a primary shadow over the market. Nafan noted that the lack of substantial agreements from US-China talks concerning regional stability in the Middle East or the security of the Strait of Hormuz has left investors feeling cautious or bearish.
Furthermore, investor anxiety is exacerbated by heightened military rhetoric from US President Donald Trump directed at Iran, which has increased the perceived risk in the region. Locally, the domestic market is also digesting the impact of several Indonesian stocks being dropped from the MSCI Global Standard and Small Cap Index. Compounding these issues, the Rupiah remains stagnant at approximately Rp17,597 per US dollar, acting as a persistent drag on index volatility.
As investors adopt a defensive posture, all eyes are turning toward the upcoming Bank Indonesia (BI) interest rate decision on May 20, 2026. Experts anticipate that BI will likely maintain the rate at 4.75 percent to safeguard the stability of the Rupiah. In this volatile environment, Nafan advises investors to remain highly selective in their stock picks and strictly adhere to risk management protocols.
Summary
The Composite Stock Price Index (IHSG) experienced a significant decline of 4.28 percent, dropping to 6,435.295 as foreign investors retreated from emerging markets. This market downturn is primarily driven by concerns over the US Federal Reserve’s monetary policy, persistent inflation, and rising oil prices stemming from geopolitical tensions. Global capital is currently shifting toward US dollar-denominated assets, putting further pressure on regional currencies and triggering widespread profit-taking.
Adding to the uncertainty, investors remain cautious due to ongoing Middle Eastern conflicts and the removal of several Indonesian stocks from the MSCI Global Index. While the Rupiah remains stagnant against the US dollar, market participants are closely awaiting the upcoming Bank Indonesia interest rate decision. Analysts advise investors to adopt a defensive strategy, remain highly selective with stock picks, and prioritize strict risk management during this period of high volatility.