Indonesia’s financial markets remain under pressure as the 10-year government bond yield climbed to 7.52%, its highest since November 2022, while the rupiah approached its record low. Higher oil prices are adding to concerns over energy subsidies and fiscal pressure, alongside the risk of MSCI reclassifying Indonesia from Emerging Market to Standalone Market status. Although foreign investors recorded US$509 million in net purchases of government bonds in October, the IHSG fell more than 2% amid fragile market sentiment.

Persistent rupiah weakness could increase pressure on Bank Indonesia to tighten monetary policy. BI has kept the policy rate at 5.75%, relying on FX intervention and hedging incentives to support the currency without weighing too heavily on economic growth. However, further depreciation and capital outflows could raise the likelihood of a rate hike, potentially tightening liquidity, increasing funding costs, and weighing on credit growth and the property sector.

The pressure is also evident in the equity market, where foreign investors recorded cumulative net selling of approximately Rp14.15 trillion from October 16–27, including preliminary data for October 27. Over the same period, the IHSG declined 2.37% from its October 16 opening level to 5,266.13, reflecting persistent concerns over Indonesia’s potential MSCI reclassification. While the sharp correction may create selective bargain-hunting opportunities, a more constructive stance would require clearer signs of stabilization in the rupiah and foreign fund flows.