Related insights
- Credit Strategy: Navigating the Warsh Era19 Jun 2026
- Research Library19 Jun 2026
- IDR and PHP Rates: Defensive hikes 19 Jun 2026
Index provider MSCI highlighted concerns over market accessibility in Indonesia, citing opaque shareholding structures and the potential for coordinated trading activity. According to them, these factors can distort price discovery and limit the ability of foreign institutional investors to participate effectively in the equity market. These remarks were made as part of its annual accessibility review on Thursday, ahead of the decision on Indonesia’s market status due on June 23. Such observations have stoked concern that Indonesia’s equity status in the index might be reclassified as a ‘frontier market’ from the current ‘emerging market’ status, which has been in place since late-1980s. A reclassification could result in broader portfolio adjustments amongst investors, especially those that require minimum EM status in their funds/ products, stoking outflows in the near-term. To recall, MSCI had highlighted transparency issues and insufficient shareholding information, amongst key risks in its review earlier in the year, in response to which regulators had introduced significant changes. As it stands, Indonesia’s weightage on the index had been on a declining path in the past few months, falling below 0.5% at last check.
Along our expectations, Bank Indonesia (BI) and Bangko Sentral ng Pilipinas (BSP) raised benchmark rates by 25bps, taking the respective rates to 5.75% and 4.75% respectively. Indonesia’s policymakers continue to remain in a defensive position, frontloading rate hikes in quick succession and undertaking macroprudential measures. With this 25bp hike, BI’s cumulative increase in May-Jun26 adds up to 100bp, underscoring the central bank’s focus on rupiah and financial market stability. Concurrently, BI also introduced specific measures to support IDR, including a) further lowering the cash FX purchase threshold without an underlying asset to $10k and documentation requirement threshold for outgoing fund transfers to $25k (from $50k monthly); b) continue a 10% hedging swap premium discount for foreign investors c) increase in banks’ foreign funding ratio (RPLN) from 35% to 40% of banking capital, effective Jul26. While IDR has appreciated in the past week, the unit is still amongst the regional underperformers (-5.8% YTD), as domestic challenges remain, including changes in the institutional mechanism, rating outlook overhang, fiscal uncertainty and concerns over the equity market review, amongst others (Indonesia: Policy reassessment and market response). Elevated UST yields and a bid dollar present additional headwinds. A pullback in global oil prices will lower the inflation impulse, though part of this could be negated by expectations of a strong El Nino and higher food costs. We continue to look for another 25bp hike in 3Q26, with risk of more to maintain favourable rate differentials.
BSP increased rates by 25bp, reinforcing its commitment to price stability, while maintaining a cautious yet measured policy outlook. Despite easing oil prices, policymakers opted to stay cautious, expecting second order effects to be persistent. May inflation at 6.8% yoy moderated from highs albeit was still way above the 2-4% policy target. Underscoring their hawkish stance, average headline inflation forecasts for 2026 and 2027 were revised up slightly to 6.4% and 4.5% respectively, pointing to above target inflation for two consecutive years. PHP has stabilised since the US-Iran deal was announced, albeit we expect policymakers to stay hawkish, tightening rates at an incremental pace. We retain our call for at least another 25bp hike at the next rate review.
Subscribe here to receive our economics & macro strategy materials.
Topic
Explore more
E & S Macro StrategyGENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates, Digital Assets or Commodities)[1]
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
[1] This disclaimer may not apply if the applicable assets fall within the definition of 'financial instruments' that are set out in Article 2(1) EU MAR (e.g. financial instruments that are traded on a regulated market, MTF or OTF, etc.). Section C of Annex I of MiFID2 specifies these 'financial instruments'.
Related insights
- Credit Strategy: Navigating the Warsh Era19 Jun 2026
- Research Library19 Jun 2026
- IDR and PHP Rates: Defensive hikes 19 Jun 2026
Related insights
- Credit Strategy: Navigating the Warsh Era19 Jun 2026
- Research Library19 Jun 2026
- IDR and PHP Rates: Defensive hikes 19 Jun 2026