SINGAPORE – Indonesia continues to notch one grim milestone after another. The latest: losing its status as South-east Asia’s largest stock market to Singapore.
The total market capitalisation of Indonesian-listed companies has fallen well over 30 per cent from a peak in January to US$618 billion (S$793 billion), while Singapore’s has climbed to US$645 billion, according to data compiled by Bloomberg.
Investor sentiment in Indonesia has increasingly soured in recent months amid uncertainties over a potential equities reclassification to frontier markets, as well as Fitch Ratings and Moody’s Ratings both cutting their credit rating outlooks to negative.
Its stock benchmark sits at the bottom among global peers, while the rupiah has touched a succession of record lows.
The momentum may not be in Indonesia’s favour at the moment, said Mr Soh Chih Kai, a portfolio manager at Lion Global Investors. Still, a revival in the future should not be ruled out, he added. “Nevertheless, this reinforces the relative standing of the Singapore market as capital flows continue to reward certainty amidst global policy uncertainty,” Mr Soh said.
Singapore stocks have benefited from economic and political stability, as well as government-led market reforms. The Straits Times Index climbed to a record this week as investors sought defensive havens during volatility sparked by the Iran war. The island nation’s stocks are on pace to outperform their Indonesian peers by the most on record in 2026.
“Wealth is a key driver for earnings growth, and together with the strong Singapore dollar, we expect more funds to flow into the market,” said Ms Carmen Lee, head of equity research at OCBC.
A sell-off of nearly US$360 billion in Indonesian stocks in 2026 highlights the growing challenges facing President Prabowo Subianto as he tries to push through ambitious growth targets and restore investor confidence. Surging energy costs may weigh on consumer sentiment, while a weaker rupiah is making imported raw materials more expensive.
Global investors have withdrawn more than US$4 billion from emerging South-east Asian equities in 2026, with Indonesia accounting for more than half the amount, according to data compiled by Bloomberg. MSCI’s decision to delete local stocks, including Barito Renewables Energy and Dian Swastatika Sentosa, from its indexes is expected to trigger outflows of as much as US$2 billion later in May, according to analysts.
Indonesia’s authorities have ramped up a broader set of reforms in recent months, such as doubling minimum float levels to 15 per cent, with a phase-in period of up to three years for some companies, to avert a downgrade. Meanwhile, economic growth has so far remained resilient.
For Indonesian share investors, the focus now turns to MSCI’s review of its market status in June, when the index compiler will decide if the country’s latest measures are enough to retain its status as an emerging market.
Recent stock market reforms are directionally positive, but the MSCI worry, fiscal concerns and currency pressure can keep investors cautious, said Mr Sufianti, an equity strategist at Bloomberg Intelligence.
BLOOMBERG