Recent developments in Indonesia have led to increased investor caution, particularly after the conviction of former education minister Nadiem Makarim for corruption related to the education digitalization program. Makarim received a 10-year prison sentence and was fined 1 billion Indonesian rupiah ($55,870), with additional restitution of 809.6 billion rupiah.
This case, coupled with MSCI's warning of a potential downgrade from 'emerging market' to 'frontier market' status, has contributed to a 7.9% decline in the Jakarta Composite Index over the past month and a staggering 35% drop year-to-date.
Analysts, including Jayden Vantarakis from Macquarie Capital, have expressed concerns about President Prabowo Subianto's fiscal policies, which are viewed unfavorably by offshore investors. A Bank of America survey indicated that Indonesia is now the least-preferred market for fund managers in Asia.
Additionally, the government's implementation of a 'single gate' export system has raised alarms about increased bureaucracy and potential government overreach in natural resource management. As a result, foreign investors have net sold $4.11 billion in Indonesian stocks in 2026, reflecting a significant shift in sentiment towards the country's investment landscape