Since January 26, Indonesia’s stock market has lost up to US$120 billion in value, its worst rout in decades, due to concerns over transparency, market governance, and the policies of Indonesian President Prabowo Subianto.
In late January, MSCI, a global index provider, flagged issues with the Indonesian Stock Exchange (IDX). Last week, Moody’s downgraded its outlook on Indonesia, citing policy and governance uncertainty. Regulators and the IDX have scrambled to stop the bleeding.
Some of Prabowo’s decisions since coming to office in October 2024 have worried investors. He fired a widely respected finance minister, deepened the country’s deficit, and recently appointed his nephew as deputy governor of Indonesia’s central bank. Some economists also questioned rosy GDP data published last week.
According to Reuters, “foreign investors net-sold almost US$832 million worth of Indonesian stocks in 2025, the heaviest year for outflows since 2020.”
A respite for Prabowo
Prabowo was perhaps relieved to push these concerns aside to host Australian Prime Minister Anthony Albanese in Jakarta last week.
During the two-day visit, Australia and Indonesia signed what both sides framed as a historic “Treaty on Common Security.” The move is both practical and political: it formalizes closer defence and security co-operation and commits to consultation if either country faces a threat, while reinforcing Indonesia’s non-aligned posture.
