DBS Group Research economist Radhika Rao reports sharp swings in Indonesian assets, with the Rupiah, bonds, and equities rebounding after recent losses. The Rupiah rallied back into the high-16k handle on Wednesday following a three-day slide to fresh lows, accompanied by gains in domestic bonds (bull steepened) and equities, driven by positive global cues [1]. Bank Indonesia (BI) reiterated that Rupiah stability remains its 'top priority,' and its strong intervention presence is evidenced by a moderation in foreign reserves to $148.2 billion in March from $151.9 billion in February, returning to mid-2024 levels [1].
The upcoming FTSE Russell and MSCI index decisions are highlighted as important for Indonesia’s equity market status, suggesting potential implications for market flows and investor sentiment [1]. Fiscal pressures are mounting, with a wider 1Q26 fiscal deficit and rising energy subsidy costs. This year’s energy subsidy bill is IDR 318 trillion, based on an oil price assumption of $70 per barrel and a USDIDR rate of 16,500, both of which have been breached since March, adding strain to the budget [1].
Rao notes that a fragile truce among global actors in the Middle East conflict will keep domestic markets attentive to developments, with short-end bond yields expected to find support as rate cuts are priced out [1].
CONCLUSION
Indonesian assets have rebounded following central bank intervention, but fiscal pressures remain elevated due to breached subsidy assumptions and a wider deficit. The market is closely watching upcoming index reviews and global geopolitical developments, with short-end bond yields likely to find support as rate cuts are priced out.