Rupiah Stability Key to Attracting Foreign Capital Inflows: Experts

RRI.CO.ID, Jakarta - The stability of the Indonesian rupiah is seen as a key factor in attracting foreign capital inflows into the stock market. The government and monetary authorities are being urged to strengthen policies to curb exchange rate volatility.

Head of Research and Chief Economist at PT Mirae Asset Sekuritas Indonesia, Rully Arya Wisnubroto, said global investors remain cautious about increasing exposure to rupiah-denominated assets as long as volatility is high.

“Exchange rate stabilization will be a crucial prerequisite for a more sustainable reversal of foreign capital flows,” Rully stated in Jakarta on Wednesday, May 6, 2026, as quoted by Antara.

He noted that the current strengthening of the Jakarta Composite Index (JCI) is driven more by external sentiment than by domestic fundamentals. Foreign capital continues to record outflows, leaving the market without a strong catalyst. “It is still too early to assume that this strengthening will continue,” he said.

On the domestic front, Research Analyst at Mirae Asset Sekuritas Indonesia, Novani Karina Saputri, reported that Indonesia’s economy grew 5.61 percent year-on-year (yoy) in the first quarter of 2026. Growth was supported by a 21.8 percent (yoy) increase in government spending and solid household consumption during Ramadan and Eid al-Fitr.

“The front-loading of fiscal stimulus also boosted economic activity at the start of the year,” Novani said.

However, the economy contracted 0.8 percent quarter-on-quarter (qoq) due to seasonal factors. “We expect growth to normalize in the next quarter as the effects of Ramadan and Eid subside and the impact of fiscal front-loading diminishes,” she added.

Externally, Novani pointed to pressures from slowing exports, stronger import growth, and a contraction in the mining sector due to weaker global commodity prices.

Looking ahead, she expects Bank Indonesia (BI) to maintain its benchmark interest rate at 4.75 percent throughout 2026, supported by contained inflation and solid growth.

Even so, she cautioned that risks remain if rupiah pressures persist and oil prices stay high, which could prompt tighter monetary policy.

“The market will be watching several key catalysts, including the results of the MSCI Market Accessibility Review in June and the consistency of policies to stabilize the rupiah,” Novani said.

As of 2:35 p.m. Jakarta time on Wednesday, May 6, the JCI was up 30.45 points, or 0.43 percent, to 7,087.55. Meanwhile, the rupiah stood at IDR 17,415 per USD.

Foreign investors still recorded a net sell of IDR 518.39 billion (USD 29.82 million) across all markets during trading on Tuesday, May 5, 2026. ***