Indonesian stocks bull market follows rebound from five-year low

Indonesian stocks bull market signals have emerged less than two months after the country’s benchmark index touched a five-year low, with LSEG data showing a gain of more than 10% from its early June trough. The Jakarta Stock Exchange Composite Index remains down about 29% for the year, underscoring how sharp the earlier sell-off had been before the recent recovery.

The rebound has been supported by cheaper valuations, steps by domestic financial regulators and a gradual return of overseas investors, according to market participants cited by CNBC. Sentiment also improved after S&P Global Ratings reaffirmed Indonesia’s BBB sovereign credit rating with a stable outlook a couple of weeks ago.

Mohit Mirpuri, senior partner at SGMC Capital, said S&P’s decision removed a key macroeconomic concern for investors. He said the market had shifted over the past month from pricing in further deterioration to pricing in stabilization.

Why did Indonesian stocks enter a bull market?

The threshold cited in the LSEG data was a rise of more than 10% from the recent low. That move followed months of selling pressure that left Indonesian equities at levels some investors viewed as inexpensive relative to other markets.

Liza Camelia, head of research at Kiwoom Sekuritas Indonesia, told CNBC that Indonesian equities had become too cheap for investors to ignore after sustained selling. She also said fiscal concerns had eased after government revenue exceeded expectations, with tax collections recovering strongly in the first half.

Foreign investor behavior also appears to have played a role. Gareth Leather, senior economist at Capital Economics, said some investors had taken profits from expensive artificial intelligence and technology shares and looked for markets that appeared safer and more attractively priced.

MSCI decision eased downgrade fears

Indonesian shares had been volatile for much of 2026 after MSCI raised concerns about governance across parts of the country’s equity market and said it would consider cutting Indonesia’s classification to frontier-market status from emerging-market status. Such a downgrade can matter because some global funds and benchmarks are built around market classifications, influencing where passive and active capital can be allocated.

MSCI ultimately held off on the downgrade. Leather said that decision was a significant relief for investors and helped stop panic selling.

The governance concerns cited by MSCI included low free floats at many companies and concentrated ownership structures. A low free float means a relatively small share of a company’s stock is available for public trading, which can reduce liquidity and make large transactions harder to execute without affecting prices.

Jeemin Bang, associate economist at Moody’s Analytics, said measures by Indonesian regulators to raise minimum free-float requirements and tighten ownership disclosure rules helped address thin liquidity, transparency issues and ownership concentration that had pushed some investors away.

The recovery leaves investors weighing a market that has rebounded quickly from a severe drawdown while still trading well below where it began the year. Analysts cited by CNBC linked the turn to a combination of valuation support, regulatory response, improved fiscal readings and relief that Indonesia retained its emerging-market classification for now.

This story draws on original reporting from CNBC.