Mirae Asset Highlights Foreign Outflows and Rupiah Weakness, Emphasizes Selectivity in Banking Stocks

PT Mirae Asset Sekuritas Indonesia views foreign investor selling pressure and rupiah depreciation as key factors for market participants to monitor amid uncertainty surrounding MSCI’s proposed reclassification of Indonesia’s equity market. These conditions also underscore the importance of selectivity in choosing banking stocks with strong funding fundamentals.

On Monday (October 26), the Jakarta Composite Index (JCI) fell 1.22%, reversing part of the gains recorded in the previous week. Foreign investors again posted a daily net sell exceeding IDR 2 trillion, while the rupiah closed above IDR 18,100 per US dollar. The weakness in both assets reflects growing concerns over Indonesia’s investment outlook and external vulnerabilities.

Rully Arya Wisnubroto, Head of Research & Chief Economist at PT Mirae Asset Sekuritas Indonesia, said that although domestic buying has so far helped absorb foreign outflows, mounting selling pressure raises questions about the sustainability of this support.

“With uncertainty surrounding MSCI still unresolved and external pressures intensifying, we remain cautious. Foreign fund flows and rupiah stability will become increasingly important in determining the JCI’s ability to sustain its recovery,” Rully said.

Against this market backdrop, banking sector fundamentals are also drawing investor attention. According to Mirae Asset’s research, banking loan growth slowed to 12.7% year-on-year (YoY) in September 2026, from 13.3% in August 2026. The slowdown was primarily driven by investment loans, which contracted 0.2% month-on-month (MoM), partly due to pressure in the construction segment.

Meanwhile, third-party fund (TPF) growth improved to 8.2% YoY, with total deposits reaching IDR 9,896 trillion. The current account and savings account (CASA) ratio also rose to 64.9%. However, the increase in funding was accompanied by higher funding costs, as reflected in rising deposit rates across various tenors. This could put pressure on banks’ net interest margins (NIMs) going forward.

Muhammad Nurkholis Syafruddin, Research Analyst at PT Mirae Asset Sekuritas Indonesia, noted that the decline in the banking sector’s loan-to-deposit ratio (LDR) to 91.7% in September 2026, from 92.7% in the previous month, does not yet indicate a structural improvement in liquidity. Meanwhile, the one-month deposit rate rose to 5.3%, while the three-month rate reached 5.9%.

“We view the decline in the LDR as temporary relief rather than a structural improvement in liquidity. Rising funding costs also point to potential margin pressure ahead,” Nurkholis explained.

Under these conditions, Mirae Asset maintains a positive view on PT Bank Central Asia Tbk (BBCA), supported by adequate liquidity, a strong low-cost funding base, and its ability to maintain NIM amid rising funding costs. Mirae Asset also remains positive on PT Bank Syariah Indonesia Tbk (BRIS), which is well-positioned to capture growing demand for Islamic financial products, with its gold business serving as one of its growth drivers.

Conversely, Mirae Asset remains cautious toward major state-owned Himbara banks, given their greater reliance on corporate funding and deposits, as well as the potential deterioration in asset quality, particularly in the construction segment. Amid market volatility, investors should closely monitor foreign fund flows, rupiah stability, and banks’ ability to manage liquidity and funding costs when determining their investment strategies.