DBS Group Research economist Radhika Rao highlights sharp swings in Indonesian assets, with the Rupiah, bonds and equities rebounding after recent losses. She notes strong Bank Indonesia intervention and the importance of upcoming FTSE Russell and MSCI index decisions for Indonesia’s equity market status. Rao also flags a wider 1Q26 fiscal deficit and rising energy subsidy pressures on the budget.

Rupiah volatility, index risk, fiscal pressures

"After a three-day slide to fresh lows, IDR rallied back into the high-16k handle on Wednesday, accompanied by gains in domestic bonds (bull steepened) and equities, on positive global cues."

"Earlier, BI had reiterated that IDR stability was its “top priority”."

"Testament to the central bank’s strong intervention presence, foreign reserves moderated to $148.2bn in Mar vs $151.9bn in Feb, back at mid-2024 levels."

"Meanwhile, a fragile truce amongst the global actors in the Middle east conflict will keep domestic markets glued to developments, with IDR short-end bond yields to find support as rate cuts get priced out."

"This year’s energy subsidy bill of IDR 318trn was built on an oil assumption of $70/bl and USDIDR at 16500, both of which have been breached since Mar."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)