Recent engagement between MSCI and the Indonesia Stock Exchange on improving transparency around concentrated ownership structures is a constructive step toward potential index methodology enhancements. However, there is still no concrete MSCI decision or timeline, meaning index-related inflows remain uncertain and largely speculative at this stage. Given this uncertainty, we believe it is still too early to rotate aggressively into smaller or less liquid names purely on potential index inclusion narratives. Our base-case positioning is to stay anchored in fundamental stocks, particularly in the banking sector, where earnings visibility, liquidity, and institutional participation remain strongest.
Banks continue to offer a combination of macro resilience, structural growth, and balance sheet strength amid a volatile macro backdrop. Loan growth remains solid, funding costs are trending lower, and fee-based income is increasingly becoming a meaningful earnings driver. In addition, banks typically act as the first beneficiaries of any broad EM risk-on rotation, making them an effective proxy for both domestic recovery and global inflow themes.
Within the banking space, BRIS stands out with a differentiated growth narrative. FY25 earnings reached Rp7.6tn (+8% YoY), supported by robust loan growth, sharply lower funding costs, and strong fee income momentum. Beyond core banking, the gold segment continues to scale as a structural growth pillar, contributing 9.4% of revenue and 7.2% of loans, with management targeting up to 1.5mn new gold customers in 2026. This adds a unique cross-selling and ecosystem-driven growth lever that is less correlated with traditional credit cycles. Asset quality saw temporary pressure from Aceh–Sumatra flooding, with LAR rising to 9.2%, but management continues to guide credit costs below 1%, suggesting risks remain manageable and largely event-driven rather than structural. Looking ahead, earnings growth is expected to remain in double digits through 2026–27, supported by balance sheet expansion and improving operating leverage.
With MSCI-related catalysts still pending and global EM sentiment remaining selective, we prefer to stay in strong fundamentals and structural growth visibility. Banks remain our preferred sector proxy, and BRIS offers an attractive combination of core banking growth and unique ecosystem-driven upside, positioning it as a strategic holding in the current market environment.