Flooring Guide by Cinvex — JAKARTA — The Indonesia Composite Index (IHSG) has faced a challenging four-month period in 2026, recording a performance that places it as the weakest-performing market in Asia year-to-date. As of Thursday, April 30, 2026, the index closed at 6,956.80, marking a significant decline of 19.55% for the year and hitting a new 2026 low.
Foreign investors have intensified the selling pressure, recording a net sell of Rp49.87 trillion throughout the year. Currently, the market trades at a price-to-earnings (PER) ratio of 14.69 times and a price-to-book value (PBV) of 1.90 times. Other regional markets have also faced headwinds, though less severely, with India down 9.75%, the Philippines down 3.62%, and Australia dipping 1.45%.
Market Drivers and Dragging Factors
Despite the broader market slump, certain stocks have bucked the trend, primarily within the commodity sector. Top performers this year include EMAS, MDKA, MEGA, AADI, MSIN, ADRO, BIPI, ANTM, BNBR, and ARKO. Conversely, the downward pressure on the index has been largely driven by major blue-chip stocks, including DSSA, BBCA, BREN, BBRI, FILM, BRPT, TLKM, BYAN, MORA, and BMRI.
This sustained market pressure is the result of a confluence of domestic and global factors. The escalation of tensions in the Middle East has driven oil prices higher, prompting a flight from risk-on assets. Furthermore, the decision by MSCI to freeze changes to Indonesian equity weightings has exacerbated short-term capital outflows.
Analyst Perspectives: A Time for Accumulation?
Abida Massi Armand, an analyst at BRI Danareksa Sekuritas, highlights that the sharp correction has brought the index’s PE ratio down to the 11–12x range. This level is nearing five-year lows and sits well below the historical average of 14–15x. “This suggests that the market has largely priced in the risks associated with the MSCI decision, rupiah depreciation, and FOMC uncertainty,” Abida explains. For medium-term investors, the current index level offers a sufficient margin of safety for gradual accumulation.
However, caution remains advised. While current valuations are arguably undervalued, the market awaits clear recovery catalysts, particularly the stabilization of the rupiah and clarity on Federal Reserve policies. Market participants are also bracing for potential further outflows of approximately Rp15 trillion following the MSCI adjustments.
Structural Reforms and Market Outlook
Despite short-term volatility, the long-term outlook is buoyed by internal market improvements. The implementation of high shareholding concentration (HSC) rules, improved free-float regulations, and stricter index criteria are viewed as essential steps toward strengthening Indonesia’s capital market structure. Abida anticipates that these reforms could pave the way for a structural return of foreign capital within the next 6 to 12 months.
“In our base case scenario, Indonesia could return to a foreign net buy position by the third or fourth quarter of 2026, provided the rupiah stabilizes below Rp17,000 and the reform schedule remains on track,” Abida noted.
Investment Strategy for Current Volatility
Muhammad Wafi, Head of Research at KISI Sekuritas, identifies several stocks with attractive valuations—boasting PBV ratios between 1 and 1.5 times—that maintain strong profit visibility. These include AADI, AKRA, BBCA, MEDC, and AMRT. Furthermore, defensive plays such as INDF and ICBP remain viable options due to their limited exposure to foreign sentiment.
Wafi observes two distinct investor behaviors in the current climate: local institutions are beginning to accumulate at support levels, while retail investors remain on the sidelines awaiting further confirmation.
“Investors can start accumulating gradually and selectively. The current correction has entered an attractive zone for long-term positions,” Wafi advised. He points to two critical dates for the market: the MSCI announcement on May 12, 2026, and the effective rebalancing on June 1, 2026. “If the MSCI announcement does not worsen the situation, there is significant potential for a relief rally.”
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