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Indonesia’s stock market is in freefall, and it’s dragging the country’s currency down with it. The Jakarta Composite Index has plunged roughly 37% from its 2026 peak, earning the unwanted distinction of being the worst-performing major global equity index, according to Bloomberg.
The Indonesian rupiah, meanwhile, has weakened more than 7% against the US dollar, briefly trading above 17,500-17,700 per USD. That’s an all-time low. Global investors aren’t just trimming positions. They’re heading for the exits.
A market rout months in the making
The sell-off didn’t appear overnight. It’s the culmination of a brutal stretch that started gaining momentum in late January 2026, when MSCI flagged potential downgrades of Indonesian equities due to ownership concentration and low free-float issues. That single warning triggered an 8% decline that erased approximately $80 billion in market value in a matter of days.
Adding fuel to the fire, six companies were removed from the MSCI index during a January rebalance. For emerging market funds that track MSCI benchmarks, this forced selling at exactly the worst time.
March and May brought additional waves of volatility, driven by further index rebalancing pressures and rising oil prices. Indonesia is a net oil importer, so higher crude costs hit the economy from multiple angles: widening the trade deficit, increasing fiscal pressure on fuel subsidies, and weakening the rupiah further.
The result is what traders are now openly calling a “Sell Indonesia” environment. Foreign investors have withdrawn billions from both Indonesian stocks and bonds, and the outflows show few signs of slowing.
Governance crisis at the top
Concerns about President Prabowo Subianto’s governance and the transparency of Indonesia’s financial markets have become central to the investor exodus.
The fallout has been institutional. The CEO of the Indonesia Stock Exchange resigned following the January crash. Leaders at OJK, Indonesia’s financial services authority, also stepped down. Authorities have since pledged governance reforms and initiatives aimed at improving market liquidity and transparency.
What this means for investors
Indonesia is the fourth most populous country on Earth and Southeast Asia’s largest economy. When a market of this size experiences a 37% drawdown while its currency simultaneously hits record lows, the ripple effects extend well beyond Jakarta.
The immediate concern is a vicious cycle. A weaker rupiah makes foreign-denominated debt more expensive for Indonesian companies and the government. That increases default risk, which prompts more selling, which weakens the rupiah further.
The liquidity picture is also deteriorating. As foreign capital exits, trading volumes thin out, which means price moves become more volatile on smaller amounts of capital. That makes it harder for remaining investors to exit positions without taking significant losses.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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