The Indonesian Composite Stock Price Index (IHSG) has experienced a significant decline over the first four months of 2026, yet this downturn presents a compelling opportunity for investors to accumulate undervalued stocks with robust fundamentals.
Muhammad Wafi, Head of Research at KISI Sekuritas, highlights several stocks boasting attractive valuations with a price-to-book ratio (PBV) of less than 1x to 1.5x, despite demonstrating strong earnings visibility. Among these are prominent names like AADI, AKRA, BBCA, MEDC, and AMRT. Additionally, INDF and ICBP emerge as viable options, given their relatively lower exposure to foreign sentiment.
Wafi observes two distinct investor behavioral patterns in the current climate: local institutions are initiating gradual accumulation at support levels, while retail investors remain on the sidelines, awaiting greater certainty. He advises, “Investors may begin accumulating now, but it should be done gradually and selectively. The current correction has pushed the market into an attractive accumulation zone for long-term prospects. Keep a close watch on two critical dates: May 12, 2026, for the MSCI announcement, and June 1, 2026, for the effective rebalancing. Should MSCI’s decision not exacerbate the situation, there’s a significant potential for a relief rally.”
Echoing this sentiment, Nafan Aji Gusta, Senior Market Analyst at Mirae Asset Sekuritas, believes investors currently possess an excellent window of opportunity to realize gains by accumulating cheaply valued stocks. Nafan foresees a considerable potential for a market rebound, projecting the IHSG could reach 8,312 as its 2026 target in a positive scenario. This optimistic outlook is further supported by the IHSG’s current price-to-earnings (PER) valuation, which now sits below its two-year average. Amidst the prevailing market conditions, Nafan advises investors to engage in phased accumulation of stocks that exhibit strong fundamental resilience.
Mirae Asset Sekuritas has put forth several stock recommendations for the second quarter of this year, including ADMR with a target price of Rp2,130, ADRO at Rp2,780, ANTM at Rp4,390, BBCA at Rp8,350, BBNI at Rp4,520, BBRI at Rp3,760, BMRI at Rp6,200, EMAS at Rp10,900, MEDC at Rp1,820, PGAS at Rp2,320, and UNTR with a target price of Rp33,975. “This environment presents a distinct opportunity, particularly for domestic investors, to accumulate undervalued stocks, even in the face of various existing sentiments, such as the negative outlooks issued by Moody’s and Fitch Ratings,” he affirmed.
LARGE-CAP STOCKS STUMBLE
The subdued performance of the Indonesian Composite Stock Price Index (IHSG) throughout 2026 year-to-date is inextricably linked to the tumbling prices of Indonesia’s colossal large-cap stocks. Shares like DSSA, BBCA, and BREN, typically the primary engines of index growth, have surprisingly found themselves among the IHSG’s top 10 year-to-date laggards.
According to data from the Indonesia Stock Exchange (IDX) as of April 30, the IHSG has plummeted approximately 19.55% year-to-date in 2026, settling at 6,956.81. This level was last observed in June 2025, when the market gradually began its ascent following the US President’s tariff announcements in April 2025. Concurrently, foreign investors have recorded a substantial net sell of Rp49.87 trillion from the domestic market this year, pushing the IHSG’s current valuation to a PER of 14.69x and a PBV of 1.9x.
A confluence of geopolitical sentiments, a scarcity of domestic catalysts, and the implementation of various new capital market reform regulations have collectively contributed to the sluggish performance of several prominent stocks throughout the year. Two notable companies appearing on the list of top laggards are PT Dian Swastatika Sentosa Tbk. (DSSA) and PT Barito Renewables Energy Tbk. (BREN). Following a stock split, DSSA experienced a sharp correction of 60.02% to Rp1,615, consequently dragging down the IHSG by 214.26 points. Similarly, PT Barito Renewables Energy Tbk. (BREN) saw its shares correct by 54.02% to Rp4,460, impacting the IHSG by 193.86 points. Both DSSA and BREN were among the nine stocks identified with high shareholding concentration (HSC) by the IDX on April 2, 2026. Since that announcement, both stocks have endured significant corrections.
Beyond these two, several other prominent banking stocks have also experienced comparable corrections. For instance, PT Bank Central Asia Tbk. (BBCA) shares plummeted 27.55% to Rp5,850, reducing the IHSG by 210.18 points. Similarly, PT Bank Rakyat Indonesia (Persero) Tbk. (BBRI) shares dropped 18.31% to Rp2,990, while PT Bank Mandiri (Persero) Tbk. (BMRI) weakened by 13.92% to Rp4,390. These two banking giants individually contributed to the IHSG’s decline by 105.19 points and 55.33 points, respectively.
The performance of PT MD Entertainment Tbk. (FILM) also saw a steep correction of 83.59% to Rp2,380. Meanwhile, PT Barito Pacific Tbk. (BRPT) plunged 43.88% to Rp1,835, and PT Telkom Indonesia (Persero) Tbk. (TLKM) slipped 19.25% to Rp2,810. Furthermore, PT Bayan Resources Tbk. (BYAN) shares tumbled 27.39% to Rp11,400, pulling the IHSG down by 68.57 points. Likewise, PT Ekamas Mora Republik Tbk. (MORA) plummeted 60.91% to Rp4,710, exerting a 56.97-point downward pressure on the IHSG.
Bank Central Asia Tbk. – TradingView
CAUSES OF IHSG PRESSURE
The persistent pressure on the Indonesian stock market this year stems from a confluence of interwoven global and domestic sentiments. Escalating oil prices, fueled by the intensifying conflict in Iran, have prompted investors to retreat from riskier assets. Adding to the headwinds, MSCI’s decision to defer changes to the composition of Indonesian stocks has triggered a short-term outflow of foreign funds.
Abida Massi Armand, an analyst at BRI Danareksa Sekuritas, highlights that this sharp correction has driven the IHSG’s price-to-earnings (PE) ratio down to the 11-12x range. This level is nearing its five-year low and significantly undercuts the historical average of 14-15x. “This reflects that most of the prevailing risks, including MSCI pressure, rupiah weakening, and FOMC uncertainty, have largely been discounted by the market,” Abida explains.
For medium-term investors, Abida suggests that the current IHSG level offers a substantial margin of safety for gradual accumulation. However, he cautions that the market still awaits crucial recovery catalysts, particularly the stabilization of the rupiah exchange rate and clearer guidance on the US Federal Reserve’s interest rate policy.
In the short term, market pressure is further overshadowed by a potential foreign fund outflow estimated at Rp15 trillion due to the MSCI decision. Nevertheless, the medium term holds promise for improvement, buoyed by internal exchange reforms. The implementation of high shareholding concentration (HSC) rules, enhancements to free float regulations, and stricter index criteria are expected to bolster the foundations of the domestic capital market.
Abida anticipates a more structural return of foreign fund inflows within the next 6-12 months, contingent on the ongoing reform efforts. Measures such as meeting the minimum 15% free float threshold and enhancing investor classification transparency are projected to significantly boost confidence among global institutional investors. “In a base-case scenario, Indonesia could potentially revert to being a foreign net-buy market in Q3 or Q4 2026, provided the rupiah stabilizes below Rp17,000 and reforms proceed as scheduled,” Abida states. Conversely, the specter of prolonged high-interest rate policies continues to pose a significant challenge for emerging markets, Indonesia included.
Disclaimer: This article is not intended as an invitation to buy or sell stocks. Investment decisions rest solely with the reader. Bisnis.com is not responsible for any losses or gains arising from the reader’s investment decisions.
Summary
The Indonesian Composite Stock Price Index (IHSG) experienced a significant decline in the first four months of 2026, falling below 7,000 to 6,956.81 by April 30, largely due to geopolitical sentiments, a lack of domestic catalysts, and a substantial foreign net sell of Rp49.87 trillion. This downturn is widely seen by market analysts as a compelling opportunity for investors to gradually accumulate undervalued stocks that possess robust fundamentals. Several large-cap stocks, including DSSA, BREN, and BBCA, were among the top laggards contributing to the index’s fall, while the IHSG’s current PE ratio nearing its five-year low indicates that most prevailing risks may already be discounted.
Analysts from KISI Sekuritas and Mirae Asset Sekuritas recommend a phased accumulation strategy, highlighting stocks like AADI, AKRA, BBCA, MEDC, AMRT, INDF, and ICBP for their attractive valuations and strong earnings visibility. Investors are advised to monitor key events such as the MSCI announcement for potential relief rallies, despite short-term foreign fund outflows. Despite these immediate pressures, a significant market rebound is projected, with the IHSG potentially reaching 8,312 in a positive scenario, further supported by ongoing internal capital market reforms aimed at attracting structural foreign fund inflows within the next 6-12 months.