RRI.CO.ID, Jakarta - The Indonesian stock market is expected to enter the second half of 2026 with room for further gains, though its trajectory will be shaped by global economic dynamics, domestic fundamentals, and foreign investment flows.

PT Mirae Asset Sekuritas Indonesia (MASI) said increasingly attractive stock valuations and Indonesia’s continued classification as an Emerging Market by Morgan Stanley Capital International (MSCI) are supportive factors for the capital market. However, global monetary policy remains a key risk that investors must monitor.

“The resurgence of foreign investor interest in large-cap bank stocks is a positive signal for the Indonesian stock market,” said MASI Head of Research and Chief Economist, Rully Arya Wisnubroto, at the Mirae Asset Media Day in Jakarta on Tuesday, July 21, 2026, as quoted by Antara.

Rully noted that market participants’ focus has shifted from capitalizing on rebound momentum to assessing economic fundamentals and issuers’ performance. “Investors’ attention is no longer solely on recovery momentum, but also on the strength of fundamentals and performance outlook amid ongoing macroeconomic challenges,” he said.

He forecast that the US Federal Reserve will raise its benchmark interest rate by 25 basis points in both September and December. The “higher for longer” policy is expected to tighten US dollar liquidity and pressure the rupiah exchange rate.

“Amid an economic slowdown and the potential for a twin deficit, Bank Indonesia’s room to raise interest rates again is becoming increasingly limited,” Rully added.

Meanwhile, MASI Research Analyst Wilbert Arifin said MSCI’s decision to maintain Indonesia’s Emerging Market status has eased concerns over a possible downgrade to Frontier Market.

Although Indonesia’s weighting in the MSCI index is set to decline to around 0.4 percent by June 2026, foreign capital inflows remain possible as valuations are at their lowest level in a decade.

“Index-linked funds still dominate net foreign outflows, while strategic investors continue to hold large-cap bank stocks. With valuations at their lowest in ten years and the potential for MSCI index inclusion to be unfrozen in the future, the opportunity for foreign capital to return remains open,” Wilbert said.

He added that maintaining macroeconomic stability, enhancing capital market competitiveness, and driving earnings growth among listed companies will be the key factors determining the direction of the Indonesian stock market in the second half of 2026. ***