IHSG: Leverage Trading Selloffs, Tactical Rotation to Defensives?
The Indonesian equity market declined by -4.1% WoW to close at 7,915 after four consecutive weeks of trading near its strong technical resistance level of around 8,200.
Conglomerate complex such as BRPT (-14.7% WoW), MLPT (-37.5% WoW), DSSA (-6.6% WoW), and TPIA (-14.5% WoW) led the selloffs, yet these were minor corrections relative to their strong outperformance so far this year.
This marked the second-worst weekly performance in 2025, behind the -5.2% WoW drawdown seen in Feb-25. Even so, IHSG has rallied substantially by +33% since its low in Apr-25, bringing its year-to-date (YTD) return to +12%.
As reiterated over the past month, we remain “cautious” on IHSG and now expect a potential tactical rotation to defensives, as market participants are likely to play it “safe” and secure profits before the end of the year.
Thus, fundamental stocks (i.e. banks) have attractive risk-reward and entry points at these levels following meaningful YTD underperformance, especially as foreign outflows have likely subsided for now.
Short-term sentiment for fundamental stocks is also positive, supported by new expansionary fiscal policy (i.e. cash handouts in 4Q25), looser monetary conditions, and news of Danantara’s possible entry to the equity market.
Nevertheless, 2026 earnings guidance will be crucial to determine whether these tactical opportunities can turn into momentum-driven upside for large-cap fundamental stocks.
If the overall guidance is weaker than expected and growth catalysts are absent, sideways movements could persist.
Furthermore, the next cycle in the conglomerate complex largely depends on whether a few of them, like BREN and BRMS, will be included in the MSCI index next month, barring any major downside risks.
