Indonesia Shares Inch Higher to Start Week

Indonesian stocks edged up 13 points, or 0.2%, to 6,186 in Monday morning trade, reversing prior-session losses on strength in infrastructure, energy, and tech. Sentiment was supported by strong May tax revenue growth and fresh infrastructure financing from the Asian Infrastructure Investment Bank. Geopolitically, reports said the U.S. and Iran approved a 60-day roadmap toward a final peace deal, including an end to hostilities in Lebanon. In top trading partner China, the PBoC held lending rates steady for a 13th month despite signs of cooling demand, with softer consumption and investment last month. However, gains were capped by worries over Bank Indonesia’s further tightening, MSCI’s downgrade of Indonesia’s Information Flow accessibility, and FTSE Russell’s removal of several local stocks from its indices. Early standouts included Sumber Alfaria Trijaya (3.7%), Indosat (3.5%), Hartadinata Abadi (2.8%), and Medco Energi (2.6%).

Indonesian equities slipped 37 points or 0.6% to 6,135 on Friday afternoon, erasing early gains and marking a third straight decline. Investor confidence dimmed as MSCI flagged transparency gaps and coordinated trading, just days before a possible downgrade to frontier status that could trigger massive capital outflows, around USD 13 billion, according to Reuters. Concerns also mounted over the impact of higher borrowing costs on household spending, after Bank Indonesia delivered a total of 100 bps of hikes since May to shore up the rupiah and stem capital flight. Still, the local market is tracking around a 2% rise for the week, the second consecutive weekly gain, boosted by hopes of a US-Iran agreement despite worries over Fed hawkishness. Losses spread across industrials, financials, property, and basic materials, with Telkom Indonesia (-6.8%), Sarana Menara Nusantara (-6.5%), Barito Pacific (-4.2%), and Bank Mandiri (-3.4%) among key laggards.

Indonesia’s IDX Composite edged up 12 points or 0.2% to 6,185 in early Friday trade, reversing losses in the prior two sessions amid a positive lead from Wall Street overnight as optimism over a potential US-Iran deal offset concerns over a hawkish Federal Reserve. Meanwhile, Bank Indonesia raised borrowing costs by 25bps on Thursday, bringing the cumulative 75bp hike since May to further support the rupiah and attract inflows. Among top movers were Merdeka Copper Gold (7.3%), Bank Central Asia (2.5%), Surya Citra Media (2.0%), and Charoen Pokphand (1.5%). Markets are heading for the second straight weekly advance, up around 3% so far, as bargain hunting continues after the benchmark hit a six-year trough. However, gains were capped by a new warning from MSCI as the index provider flagged weak visibility in shareholdings and signs of coordinated trading, just days before it decides whether to reclassify Indonesia as a frontier market, a downgrade that could accelerate fund outflows.