Highlights:

– Indonesian equities fell sharply after violent protests and looting erupted in several cities.
– The rupiah weakened against the U.S. dollar, while bond yields spiked amid investor flight to safety.
– Analysts warn prolonged unrest could derail foreign investment and dampen Southeast Asia’s growth outlook.

Indonesian financial markets faced a turbulent session after widespread protests escalated into looting and clashes in major urban centers, raising concerns over political stability in Southeast Asia’s largest economy. The Jakarta Composite Index (JCI) tumbled more than 2.5% in Monday trading, while the rupiah slid to a three-month low against the U.S. dollar.

Equities and Currency Under Pressure

The sharp drop in Indonesian equities reflected investor unease over both domestic unrest and its potential spillover into regional markets. Financial and consumer stocks bore the brunt of the selloff, as violence disrupted business operations in Jakarta and Surabaya. At the same time, the rupiah weakened to 15,500 per U.S. dollar, with traders citing heightened demand for safe-haven currencies such as the greenback and Japanese yen. Bond markets also mirrored the risk-off sentiment, with 10-year government yields climbing above 7%, the highest in nearly six months.

Impact on Investment and Capital Flows

Indonesia has long relied on foreign direct investment to fuel growth, particularly in infrastructure and manufacturing. The latest unrest has raised concerns among international investors, who were already cautious amid slowing global demand and weaker commodity prices. According to regional analysts, if protests persist, capital inflows could slow further, increasing reliance on domestic financing and pressuring the government’s fiscal position. Sovereign credit default swaps widened by 12 basis points on Monday, signaling higher perceived risk of holding Indonesian debt.

Regional and Global Implications

The turbulence in Indonesia comes at a time when emerging markets are already facing pressure from elevated U.S. interest rates and a stronger dollar. For regional investors—including those in Tel Aviv who maintain exposure to Southeast Asian funds—the selloff underscores the interconnected risks of political instability and global capital flows. With Indonesia serving as a key exporter of coal, palm oil, and nickel, prolonged unrest could also weigh on global supply chains, particularly in energy and raw materials.

Looking ahead, markets will be watching closely how the Indonesian government responds to the unrest, both in terms of security measures and economic stabilization policies. A swift resolution could help restore investor confidence, while prolonged turmoil risks deepening capital flight and slowing growth across the region. For global investors, Indonesia has become a litmus test of how emerging economies balance political pressures with financial stability in a volatile global environment.