KONTAN.CO.ID – JAKARTA. The Jakarta Composite Index (IHSG) is expected to face continued volatility on the final trading day of May 2026, driven by a complex interplay of domestic and global sentiments.
According to capital market observer Irwan Ariston, the much-discussed MSCI index rebalancing in early June is unlikely to significantly alter the IHSG’s short-term trajectory. He explained, “Currently, I don’t see the MSCI issue having a substantial influence on the IHSG’s movement because market participants have already factored it in.” Instead, Irwan suggests that current stock market movements are predominantly influenced by domestic economic fundamentals, particularly the crucial element of investor confidence. “Stock prices are more heavily influenced by the condition and prospects of Indonesia’s economic fundamentals,” he clarified.
Irwan highlighted the persistent depreciation of the rupiah against the US dollar as a key indicator of waning market trust. This weakening is particularly concerning as it occurs amidst a period where other regional currencies generally show stability or even appreciation. “We can observe this through the continuous weakening of the rupiah against the US dollar at a time when other countries’ currencies tend to strengthen or remain neutral,” he stated, emphasizing the urgency of restoring belief in the economy.
He underscored that trust is a paramount factor in all aspects of investment, economics, and politics, extending from market players to the broader public. “In the realms of investment, economics, and politics, the trust of both the market and the public is the foremost and most crucial asset that state administrators must possess,” Irwan asserted. Without this solid confidence, he argued, various investment instruments, including stocks, become significantly less appealing due to heightened risks. “Without solid trust, any stock currently becomes unattractive as the inherent risks escalate,” he added.
Irwan also cautioned that investors’ risk assessments extend beyond purely economic factors. They encompass a wider spectrum of concerns, including exchange rate risks, security concerns, legal certainty, and political stability. Furthermore, he observed that market participants are becoming increasingly critical in evaluating government policies and promises. Their judgment is now closely aligned with evolving economic data and the realities on the ground. “Market players will assess whether these statements and promises are followed by concrete improvement actions,” he commented.
Given these prevailing conditions, Irwan projects that the IHSG is likely to exhibit short-term volatility, including in the coming week, primarily because market confidence has yet to fully recover. Regarding investment strategy, he advises heightened caution, especially for novice investors. “For those new to the market, it’s advisable to adopt a ‘wait and see’ approach, holding off until tangible improvements become evident,” he suggested.
Meanwhile, for investors who already hold stock portfolios, Irwan recommends a thorough verification of the fundamental quality of their owned issuers. “Ensure that the stocks you hold possess strong fundamentals, even though the risk of price decline persists,” he emphasized. He also presented options for investors to adjust their portfolios according to their individual risk profiles, stating, “Actions could include reducing holdings or continuing to hold while anticipating improvements within the next 2-3 months.”
Summary
The Jakarta Composite Index (IHSG) is expected to continue experiencing volatility in late May 2026, primarily influenced by domestic economic fundamentals and investor confidence, with the MSCI rebalancing having minimal short-term impact. The persistent depreciation of the rupiah against the US dollar is highlighted as a key indicator of declining market trust. Expert analysis indicates that investor confidence is paramount, as its absence increases perceived risks and makes investment instruments like stocks less appealing.
Investors’ risk assessments extend beyond economics to include exchange rates, security, legal certainty, and political stability, with market players critically evaluating government policies against economic realities. Consequently, short-term volatility for the IHSG is projected to persist due to unrecovered market confidence. New investors are advised to adopt a “wait and see” approach, while existing investors should verify their holdings’ fundamental quality and adjust portfolios based on their risk profiles, possibly reducing positions or holding for anticipated improvements.