The largest foreign exodus on record, one of the deepest equity de-ratings in its history, and a currency down ~20% even against its peers in just over 18 months—Indonesia has absorbed a three-front shock that now appears sufficiently long and deep to have largely run its course. While perceived risks such as fiscal slippage and policy uncertainty may persist, the concept of shock decay suggests the market has already undergone a more prolonged and severe sell-off than historical precedents, indicating that much of the adverse news has been digested and priced in. Valuation Destruction Forward P/E has de-rated >40% from its Jan-26 peak, marking one of the deepest compressions on record both in absolute and relative terms to peers. The duration is also consistent with past cycles, taking ~20 weeks to bottom. At around 10.7x currently, it is more than 2σ below the mean, implying a ~30% discount to ASEAN and ~47% to APAC—making Indonesia the cheapest and most idiosyncratically discounted market in our dataset Flow Exodus The largest foreign investors outflow on record, over $10bn out past 18 months, 23x any prior episode, cutting foreign ownership from $102bn to $50bn through a combination of asset-price destruction, rupiah depreciation, and outright selling. It is deep enough, amounting to capitulation, and long enough, at ~27 months against a typical ~911, all but exhausting the pool of offshore sellers. The pace has now begun to abate from its June peak, the first sign that the shock is decaying, not intensifying. The Linchpin of the Call Down ~20%, the rupiah has become both the origin and amplifier of risk, with the vicious cycle breaking only as selling pressure exhausts. It is long enough (89 weeks or 2.4x norm) and deep enough, especially when compared to regional peers, a near record idiosyncratic move. Notably, stress stays in the currency, not the sovereign. Five-year CDS spiked just +39bps against the +100 to +190bps seen in genuine regime shocks, at a low ~91bps. This is a rupiah re-basing, not a solvency scares. Since currency re-bases rather than reverts, the key is stabilization, not recovery. The rupiah, and crucially net FX reserves, now appear to be finding a floor on which everything hinges. Risks Capped For all the second order risks a weaker rupiah carries, including business confidence and purchasing power, Indonesian corporates’ balance sheet is among its firmest ever: net gearing near 0.5x, interest at 2-3% of revenue (against the fiscal ~19% for a fourth year), and negligible currency mismatch. This caps how much further damage the rupiah can inflict. Two overhangs are clearing too: the S&P verdict removed the elephant in the room and MSCI HSC concentration flag (28% of market cap vs. HK’s 0.6%, signaling the reform’s depth). 

Caveats and Preconditions The fiscal prudence, the source of the shock, needs to remain anchored: a deficit of ~2.8% for 2026 and 1.8 – 2.4% for 2027. Efficiency on the free-meal programme cut by ~Rp100trn in 2026, possibly more in 2027, from its Rp335trn budget following the revamp; and military and police outlays reprioritized toward social aid, are notable initiatives that need to be realized. The parallel worry of new village cooperatives (Kopdes) sidelining retailers has been allayed by the president’s assurance that they must neither monopolise nor impede existing players; this must be adhered to. Danantara’s (DSI) drive to curb export underinvoicing, acting as an agency rather than a trader, matters. Stocks – deep value Against this backdrop, we prefer beaten-down, value, and names where willing sellers are already spent. Among the banks, we prefer BBRI and BBCA, as they remain the cheapest within the sector and towards their own history, both trading at −1.7σ P/E of 5-years. Among consumers, we favour KLBF, ICBP, and AMRT – quality compounders that normally command a premium to the market, yet now sit at a ~30% discount, the deepest relative deratings in the group. In commodity space, we favour AMMN, ANTM, AKRA, and TAPG for their localized demand, cheap valuations, and high yields. 

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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Jupriadi Tan (jupriadi.tan@verdhana.id)

Gerald Hugo (gerald.hugo@verdhana.id)

David Tjahjadi (david.tjahjadi@verdhana.id)

Felix Justin (felix.wirianto@verdhana.id)