Singapore Surpasses Indonesia as Largest Southeast Asian Stock Market

Indonesia Loses Status as Southeast Asia's Largest Stock Market to Singapore

Indonesia continues to notch one grim milestone after another, with the latest being its loss of status as Southeast Asia's largest stock market to Singapore. The total market capitalization of Indonesian-listed companies has fallen by over 30% from its peak in January to $618 billion, while Singapore's has climbed to $645 billion, according to data compiled by Bloomberg.

Investor sentiment in Indonesia has increasingly soured in recent months amid uncertainties over a potential equities reclassification to frontier markets, as well as Fitch Ratings Inc. and Moody's Ratings both cutting their credit rating outlooks to negative. The country's stock benchmark sits at the bottom among global peers while the rupiah has touched a succession of record lows.

The momentum may not be in Indonesia's favor at the moment, with a revival in the future not being ruled out. However, Singapore equities have benefited from economic and political stability, as well as government-led market reforms. The Straits Times Index climbed to a record this week as investors sought defensive havens during volatility sparked by the Iran war.

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The island nation's stocks are on pace to outperform their Indonesian peers by the most on record in 2026. "Wealth is a key driver for earnings growth, and together with the strong Singapore dollar, we expect more funds to flow into the market," said Carmen Lee, head of equity research at Oversea-Chinese Banking Corp.

A selloff of nearly $360 billion in Indonesian stocks this year highlights the growing challenges facing President Prabowo Subianto as he tries to push through ambitious growth targets and restore investor confidence. Surging energy costs may weigh on consumer sentiment, while a weaker rupiah is making imported raw materials more expensive.

Global investors have withdrawn more than $4 billion from emerging Southeast Asian equities this year, with Indonesia accounting for more than half the amount, according to data compiled by Bloomberg. MSCI Inc.'s decision to delete local stocks, including PT Barito Renewables Energy and PT Dian Swastatika Sentosa, from its indexes is expected to trigger outflows of as much as $2 billion later this month, according to analysts.

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Indonesia's authorities have ramped up a broader set of reforms in recent months, such as doubling minimum float levels to 15%, with a phase-in period of up to three years for some companies, to avert a downgrade. Meanwhile, economic growth has so far remained resilient. For Indonesian equity investors, the focus now turns to MSCI's review of its market status next month, where the index compiler will decide if the country's latest measures are enough to retain its status as an emerging market.