JAKARTA – The movement of the Jakarta Composite Index (IHSG) in the second half of 2026 is expected to be characterized by short-term volatility. This turbulence follows the rebalancing of major global indices, including MSCI and FTSE Russell, which has triggered a wave of foreign capital outflows from the Indonesian stock market.
In its most recent quarterly review for June 2026, FTSE Russell conducted a significant “cleanup” of its Indonesian listings, resulting in the removal of four specific stocks from the index. These companies include PT Dian Swastatika Sentosa Tbk. (DSSA), PT Daaz Bara Lestari Tbk. (DAAZ), PT Hillcon Tbk. (HILL), and PT Mulia Industrindo Tbk. (MLIA). The exclusions were primarily driven by issues regarding ownership concentration and failure to meet free float criteria or surveillance stock screens.
Ajaib Sekuritas highlighted on its official platform that the exit of these stocks has led to a reduction in Indonesia’s overall weighting within the FTSE Russell index. This shift is anticipated to trigger a net sell-off by global passive funds. According to data from Ajaib, the net free float market capitalization of the 39 Indonesian stocks in the large and mid-cap categories of the FTSE Russell Emerging Markets index previously accounted for 0.88% of the total index.
However, following the removal of DSSA, Indonesia’s weighting has dipped to 0.86%. “This decline risks triggering outflows from global institutional investors who utilize the FTSE Russell index as their primary investment benchmark,” Ajaib stated in a report published on Tuesday (May 26, 2026).
Ajaib estimates that the potential outflow from the Vanguard FTSE Emerging Market ETF alone could reach US$27.72 million (approximately Rp487.8 billion). Furthermore, the total potential outflow from passive funds is predicted to exceed US$297 million, or roughly Rp5.2 trillion. Selling pressure is expected to persist until the rebalancing officially takes effect on June 22, 2026.
Providing further perspective, Nafan Aji Gusta, Senior Analyst at Mirae Asset Sekuritas, noted that domestic market volatility will likely continue in the short term until the portfolio adjustment process for global passive funds is finalized. “Regarding the market pricing in these changes, it may not be fully complete as market participants must navigate the crucial phase leading up to the MSCI rebalancing on May 29 and the FTSE rebalancing on June 22,” Nafan explained.
Nevertheless, Nafan believes the door remains wide open for an IHSG rebound in the second half of 2026 once the rebalancing phase concludes. He identified several key factors that could serve as positive catalysts for the Indonesian stock market.
First, the potential cooling of global geopolitical tensions—particularly the conflict involving Iran, the United States, and Israel—is expected to improve investor sentiment toward riskier assets, including emerging markets like Indonesia. Additionally, greater certainty regarding the U.S. Federal Reserve’s interest rate trajectory is seen as a vital factor, especially given that domestic stock valuations are currently considered quite attractive.
Second, Indonesia’s capital market reforms are beginning to receive positive feedback from global index providers. This is evidenced by the implementation of the IDX’s HSC method to screen for stocks with inadequate free float quality and liquidity. “In the long run, the perception of global investors will improve as our market becomes far more credible, less susceptible to manipulation, and protected from extreme price fluctuations caused by artificial liquidity,” Nafan added.
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