The index has recovered half of its fall, and the selling has stayed inside the nine

The JCI closed at 5,439 on 23 October, 7.2% below the 15 October close of 5,864 and 8.9% above the 19 Oct low of 4,997. The nine MSCI constituents returned -14.3% on 16 October against -10.0% for every other index name, then +8.0% over the next 5 sessions against +3.3%. The rebound went to the names that had been sold, and the buyers were domestic. Exhibit 1 shows it day by day: foreigners kept selling the nine MSCI names, and from 19 October the four state brokers turned into steady buyers of state-owned names and BBCA.

Foreigners sold a net Rp11.5tn from 16 October: Rp3.41tn on the first day and about Rp1.6tn a day since, 92% of it in the nine MSCI names and 91% in banks. Our flow series, built from IDX's per-stock data, matches the published daily figures within a few percent. The JISDOR fixing moved from 17,948 to 18,069, Brent from USD 106 to 112, the 10-year government bond yield from 7.25% to 7.42% and the five-year CDS from 95bp to 100bp by 22 October, still below the 105bp of March. Large caps (-7.5%) beat small caps (-8.2%) and high-foreign names (-7.1%) beat low-foreign names (-11.7%).

Nothing in MSCI's process lands in the next two months

MSCI's consultation runs to 30 April 2027 and the decision is due on or before 30 June 2027; no implementation date has been set. On the UBS call of 20 October MSCI said it does not consider Indonesia to warrant Emerging Market status today, that disclosure is necessary but not sufficient, that it wants evidence of deterrent enforcement across the whole market, and that an interim assessment is possible if new measures appear before April. Inside the next two months sit the November index review (announced 11 November, effective 1 December, with the freeze still in place), the end-October ownership filings, Bank Indonesia's meetings of 17-18 November and 15-16 December, two reserve-requirement cuts, and the HSC removal from the IHSG on a date IDX has yet to set. The passive selling is not among them.

Marked to 23 Oct prices the selling we expect is USD 5.5bn. USD 3.8bn is passive: none of it done, all of it due on the implementation date and executed largely at that day's close, where it equals about 23 days of the nine names' normal trading. The other USD 1.7bn is active, half of what active EM funds held in June, which is an assumption about behaviour; foreigners have sold USD 0.59bn of the nine since 16 October, so at most 34% of it is done. UBS put the figures at USD 4bn passive and USD 8bn active, a wider set of funds than ours. On turnover before the announcement the active leg takes about 42 sessions at a quarter of daily value, and the slowest name, BBCA, takes 167 sessions for its full share; our earlier "106 sessions" used turnover lifted 20% by the high-volume days since 16 October.

Three paths for the next two months, and oil above USD 100 sits inside the base case

We keep the odds at base 55%, bear 25% and bull 20%, with ranges set on the free-float P/E of the JCI ex-HSC, 9.2x now against 8.3x at the 19 October low and 9.9x on 15 October. The probability-weighted centre is 5,356, -1.5% from the close; the ranges are on the ex-HSC basis because IDX will re-base the index when the HSC names leave.

Oil keeps the base case a range rather than a recovery. Indonesia's crude marker averaged USD 112.8 in September against USD 70 in the 2026 budget, each dollar of difference adds about Rp6.8tn to the deficit, and energy subsidies had used 84% of their ceiling by September. Closing that gap takes more bond issuance or higher fuel prices, and both work against the domestic buyer: issuance keeps the 10-year near 7.4% as an alternative for insurers and pension funds, and higher fuel prices push inflation (3.28% in September) toward the top of the 1.5-3.5% band. Bank Indonesia's 21 October package points the same way: it held the BI-Rate at 5.75%, raised the deposit facility to 5.00% and will cut rupiah reserve requirements by two points in November and December, releasing about Rp190tn by its own estimate, liquidity aimed at lending and government bonds while credit grows 13.3% against deposits at 8.2%.

The end-2027 target moves to 5,600

We rebuild the target from the ex-HSC multiple instead of setting it against spot: today's index scaled by the ratio of a 2027 multiple to today's 9.2x, by earnings growth through 2027, and by the lasting effect of the passive selling if Standalone is implemented. We put an 80% probability on Standalone, MSCI's stated view and the outcome of nine of the ten downgrade consultations since 2006, with the multiple near today's range at 8.75x; if Indonesia stays in EM it returns to 10.0x, the 30 September level. That blends to 9.0x. Trailing free-float earnings grew 6.1% in the year to 2Q26 (banks 8.0%, non-banks 4.6%) and we use 5% a year to allow for oil and the rupiah; the passive leg takes 2.5% off if implemented. The result is 5,629, rounded to 5,600, 3.0% above the close, with a range of 5,300-5,950. The 5,500 set on 23 October implied a Standalone multiple of 8.5x, the October low, or growth of 3.4% a year. A target this close to spot is consistent with a neutral stance.

Economic Update - FFR - Waiting for clarity

Economic Update - FFR - Waiting for clarity

Felix Darmawan

Macroeconomy

29 October 2026 - 07.52am

Economic Update - FFR - Waiting for clarity

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