The Jakarta Composite Index (JCI) remains in a wait-and-see phase ahead of the MSCI adjustment on May 29, with foreign outflows continuing to pressure the market. In this environment, banking stocks are still facing short-term selling pressure, making it more ideal to gradually accumulate big banks closer to or on the adjustment date itself. From a valuation perspective, however, banking names are already trading at attractive levels for the mid-to-long term and are approaching bottom territory, particularly as the MSCI adjustment process is already halfway through. In addition, S&P Global Ratings continues to maintain a relatively stable view on Indonesia, suggesting that long-term fundamentals remain intact.

That said, external pressures remain the key concern, particularly from rupiah weakness and ongoing geopolitical uncertainty. The Ministry of Finance has continued efforts to stabilize the government bond market in order to maintain SBN yields and support the rupiah, which is currently trading at record-low levels against the U.S. dollar. In this environment, pressure on Bank Indonesia to adopt a more hawkish stance is becoming increasingly difficult to avoid.

Markets currently see BI in a difficult position. If BI raises rates, it could further slow an already fragile economy. However, if rates remain unchanged, the rupiah could weaken further, worsening imported inflation risks and potentially discouraging foreign investors from holding domestic bonds. As a result, Wednesday’s BI decision is expected to become one of the key short-term catalysts for market direction.

On top of macro concerns, market sentiment is also being weighed down by rumors surrounding the potential establishment of a new export agency in Indonesia that would centralize exports of commodities such as coal, CPO, and minerals. Under the proposed structure, exporters may be required to sell products to the new entity before export. This has raised market concerns over possible price controls and greater government intervention in commodity export mechanisms, adding further pressure to domestic market sentiment in the near term.