Indonesia JCI gained 4.64% in August 2026; Rp1.2tn foreign inflows

Schroders Indonesia Monthly Market Recap & Commentary - August 2026

In August 2026, the JCI gained 4.64% MoM, supported by foreign inflows of Rp1.2tn, while the LQ45 and IDX80 rose 3.63% and 3.94%, respectively. Market volatility early in the month, driven by profit-taking ahead of the Independence Day presidential address, eased after the government reaffirmed a 2027 fiscal deficit target of 2.4% and clarified that DSI would serve only a monitoring role in commodity exports. Sentiment was further boosted by Destry Damayanti’s nomination as the sole candidate for Bank Indonesia Governor. Global bond yields moved higher in August as Fed Chair Kevin Warsh struck a hawkish tone at Jackson Hole, citing resilient growth and persistent inflation. Listen the podcast and read the full report below.

Indonesia posted a trade deficit of US$450mn in June 2026, marking the second straight month of deficit, although the gap narrowed significantly from the previous five-month average deficit of US$1.6bn and came in better than market expectations of -US$790mn. The shortfall was driven by a surge in imports to US$25.9bn (+34% YoY), which outpaced export growth. Meanwhile, exports rose 9% YoY to US$25.5bn, supported by stronger non-oil and gas shipments to China, the US, Japan, and ASEAN markets, despite a 4% YoY decline in oil and gas exports.

Indonesia’s Manufacturing PMI recovered to 50.2 in July 2026 from 46.9 in June, returning to expansionary territory after slipping into contraction the previous month. The rebound points to a gradual improvement in consumer sentiment, although spending activity continues to be weighed down by relatively high price levels.

Annual inflation in Indonesia moderated to 2.88% YoY in July 2026 from 3.34% YoY in June. Price pressures were primarily driven by the food, beverage, and tobacco category, which increased 2.97% YoY, while transportation and personal care services remained key contributors, recording inflation rates of 5.12% YoY and 9.04% YoY, respectively.

The Manufacturing Business Conditions and Outlook Index (IKBM) rose to 52.31 in 2Q26 from 51.37 in the prior quarter, reflecting improving business sentiment and stronger operating conditions across the manufacturing sector.

President Prabowo reaffirmed the government’s commitment to achieving 6% GDP growth in 2027 while maintaining a fiscal deficit target of 2.4%. The administration also emphasized enhancing the effectiveness and efficiency of key government initiatives, rather than relying solely on increased fiscal spending.

The House of Representatives’ Commission XI has approved Destry Damayanti as Governor of Bank Indonesia for the 2026-2031 term. Following the fit-and-proper test process, Aida S. Budiman was nominated as Senior Deputy Governor, while Solikin M. Juhro was nominated for the position of Deputy Governor.

In the month of August 2026, JCI posted a return of +4.64% MoM with foreign inflow of Rp1.2tn. LQ45 index posted a MoM return of +3.63% while IDX80 at +3.94%. Market started off more on the volatile side at the start of the month as investors took some profit in anticipation of the Presidential speech for Independence Day. The speech turned out to be less negative than investors anticipated as 2027 fiscal deficit is aimed at 2.4% which is lower than this year’s level of 2.7%. Moreover, the President confirmed that DSI will only monitor pricing for commodities export and will not be involved as the agent in the execution which eased investors’ concerns on the sector. Market rejoices as Destry Damayanti became the sole candidate for the new Bank Indonesia governor. On the global side, gold price jumped as US jobs data and inflation is not as bad as anticipated which should have prevented the Fed from being too hawkish. However, towards the end of the month, Kevin Warsh stated that he is dedicated to achieve the 2% inflation target and keep it at bay which sets investors to anticipate rate hike in the horizon. Meanwhile, the US Department of Treasury announced the doubling of UST buybacks during the month. FTSE announced that they will keep Indonesia in their watchlist until the end of the month similar to MSCI. IDX announced that it may look to open the IDR50

sh price floor hence allowing stocks to trade to Rp1

sh. The execution is planned to be in September at the earliest.

US equities ended August near record highs with the S&P 500 rising by 2.7% despite heightened volatility driven by persistent inflation concerns, elevated oil prices, and uncertainty surrounding the Federal Reserve’s next policy move. Investor sentiment remained supported by stronger-than-expected Q2 earnings and continued strength in AI-related sectors, while economic data suggested the US economy remained resilient despite some moderation in growth.

On the macro front, the labor market remained healthy with the unemployment rate at 4.1%, while consumer spending continued to show resilience. GDP growth slowed to 1.5% annualized in Q2, down from 2.1% in the previous quarter, indicating a cooling but still expanding economy. Inflation remained sticky, with Core PCE holding at 3.3% YoY, well above the Fed’s 2% target, reinforcing the higher-for-longer interest rate narrative. Business investment also remained robust, as non-defense capital goods orders excluding aircraft, a key proxy for corporate spending, continued to trend higher, highlighting ongoing confidence among businesses despite elevated borrowing costs.

Policy developments were also closely watched during the month. At the Jackson Hole symposium, Fed Chair Warsh adopted a hawkish tone, emphasizing inflation risks and suggesting that, barring meaningful softening in upcoming inflation and employment data, a 25bps rate hike at the September 16 FOMC meeting remained a likely outcome. Meanwhile, the U.S. Treasury unexpectedly announced an expansion of its long-term Treasury buyback program, effectively purchasing a larger share of newly issued 20- and 30-year bonds in an apparent effort to alleviate upward pressure on long-term yields, although markets remain skeptical about the effectiveness of the measure.

European equities advanced during August as investors grew more confident that the Eurozone economy is emerging from the energy-related slowdown while inflation pressures continue to moderate. Improved macroeconomic data supported market sentiment, with the Composite PMI rising to 52.1, the ZEW Economic Sentiment Index climbing to 31.4, and consumer confidence improving for a fourth consecutive month to-15.5, all pointing to a gradual recovery in economic activity.

The equity market was supported by stronger cyclical sectors, particularly industrials and financials, as investors rotated into companies that could benefit from improving growth momentum. At the same time, easing underlying inflation pressures, reflected in softer ECB inflation expectations and slower negotiated wage growth, strengthened hopes that monetary policy is nearing a less restrictive phase. While energy prices remained a source of upside risk to headline inflation, the stabilization in core inflation helped support valuations across the region. Overall, Eurozone equities benefited from the constructive combination of improving growth indicators and easing domestic price pressures.

UK equities posted modest gains in August as investors looked beyond a temporary rise in headline inflation and focused on improving underlying inflation dynamics. The FTSE 100 was supported by its exposure to global earnings and energy companies, while domestically focused sectors benefited from signs that inflation pressures and wage growth are gradually moderating. Consumer sentiment also improved from earlier lows, providing additional support for the domestic economic outlook

On the macro front, headline CPI increased to 2.9% YoY in July from 2.6%, mainly due to higher household energy bills. However, the underlying inflation picture remained encouraging as core CPI held steady at 2.6% YoY, services inflation continued to ease, and food and transport inflation moderated. Labor market data also pointed to softer conditions, with unemployment rising to around 4.9% and wage growth slowing, reducing concerns over persistent domestic inflation pressures. These developments reinforced expectations that the Bank of England can maintain a cautious policy stance without the need for aggressive tightening. Overall, UK equities were supported by expectations of a soft economic landing, as easing underlying inflation and a cooling labor market improved the outlook for monetary policy while economic activity remained resilient.

Japanese equities ended August on a positive note with Japan’s TOPIX Index rose by 3.9%, supported by a weaker yen and solid export performance, which continued to benefit export-oriented sectors such as autos, industrials, and technology. Investors also weighed the prospect of a more hawkish Bank of Japan as inflation continued to trend higher.

Economic data was mixed during the month. Q2 GDP grew 1.1% annualized, missing expectations of 2.0%, as weaker private consumption and public investment offset strong export growth. Meanwhile, trade activity remained robust, with both exports and imports accelerating in June, resulting in a wider JPY 634.5 billion trade deficit.

Inflation continued to firm, with National CPI rising 1.9% YoY in July and Tokyo CPI accelerating to 1.9% YoY in August, reflecting the pass-through of higher energy prices and the weaker yen. The continued pickup in inflation is expected to persist through year-end, increasing pressure on the BoJ to move more quickly on policy normalization and future rate hikes. Overall, Japanese equities remained supported by resilient exports and currency tailwinds, although investor attention increasingly shifted toward rising inflation and the potential for tighter monetary policy ahead.

Asia ex-Japan equities delivered mixed performance in August as investors balanced resilient technology-related growth against weakening Chinese activity data and diverging central bank policies across the region. Markets with significant semiconductor exposure, particularly South Korea and Taiwan, continued to benefit from strong AI-related demand, while China remained a drag on broader regional sentiment amid soft domestic demand and slowing growth momentum.

China’s economic data broadly disappointed during the month. Industrial production grew 4.5% YoY, retail sales increased just 0.6% YoY, and fixed asset investment declined 6.7% YTD YoY, all missing market expectations and highlighting continued weakness in domestic demand. In addition, industrial profit growth moderated to 11.2% YoY as the earlier boost from elevated oil prices faded and sluggish domestic consumption offset strength in technology-related sectors. Against this backdrop, the 1-year and 5-year Loan Prime Rates (LPRs) were left unchanged at 3.0% and 3.5%, respectively, reinforcing expectations that policymakers may need to step up support measures should growth weaken further.

Elsewhere in Asia, central banks took divergent paths. The Bank of Korea raised its policy rate by 25bps to 3.0%, while the Bank of Thailand maintained its benchmark rate at 1.0%, citing weak growth and contained inflation. Meanwhile, the Bangko Sentral ng Pilipinas (BSP) raised rates by 25bps to 5.0%, marking its third consecutive hike amid persistent inflation pressures. In Latin America, Banxico raised its 2026 growth forecast to 1.5% from 1.1% following a stronger-than-expected Q2 recovery, although it pushed back the expected timing of achieving its 3% inflation target to Q4 2027. Overall, regional equities remained supported by the semiconductor and AI cycle, but gains were constrained by concerns over China’s slowing economy and tighter monetary policy in parts of Asia