The crash of Indonesian stock prices last week is less about market technicalities than about a profound collapse of political trust.
Much commentary has focused on familiar explanations: low free float, foreign outflows, thin liquidity, global volatility. These factors matter, but they miss the larger point. Markets do not merely price earnings, interest rates, or technical indicators. They price credibility, predictability, and legitimacy. What investors reacted to was not simply a bad trading week, but a deeper unease about how power is exercised in Indonesia, and whether its institutions still function as credible guardians of the public interest.
Markets do not collapse merely because numbers look bad. They collapse when confidence erodes, when investors begin to doubt not only valuations but the credibility of institutions, the clarity of rules, and the predictability of power. What unfolded in Jakarta was not an isolated financial event, but a political-economic moment, one that exposes deeper anxieties about governance in Indonesia today.
This is why attempts to explain the sell-off as a routine correction miss the point. The speed and intensity of the decline, followed by emergency announcements and sudden resignations, suggest not a market calmly digesting information, but one reacting to accumulated uncertainty. In such contexts, price movements are not simply responses to data; they are expressions of belief, and disbelief.
Those doubts have been building for some time. Morgan Stanley Capital International (MSCI), whose indices shape global capital flows, has already raised concerns over the lack of transparency in the ownership structures of Indonesian-listed companies and the possibility of coordinated trading behavior that undermines fair price formation.
Clients flagged unclear data obscuring how much stock is genuinely available for public trading, the so-called free float. Indonesia already has one of the lowest average free floats in Asia, with many major companies tightly controlled by dominant shareholders and thinly traded. For institutional investors, this makes entering and exiting positions difficult without distorting prices.
These are technical issues, but they reflect something broader. Opaque data, limited disclosure, and elite concentration are not confined to the stock market. They echo across governance under President Prabowo Subianto’s administration: from the lack of transparency surrounding flagship programs such as the free school meals initiative (MBG), Danantara, food estates, and the Red-and-White cooperatives, to persistent concerns about oligarchic capture of economic policy. The stock market crash, in this sense, looks less like an anomaly than the tip of a deeper iceberg.
What makes this moment particularly revealing is how institutions reacted. In the days following the sell-off, both the chief executive of the Indonesia Stock Exchange and the head of the Financial Services Authority (OJK) together with some of their senior officials stepped down. Leadership changes at two core market institutions, arriving simultaneously and under pressure, are rarely interpreted as coincidence. They signal that the shock exposed weaknesses serious enough to require accountability, or at least visible sacrifice. For investors, these resignations confirmed that the problem lay not merely in market sentiment, but in oversight and credibility.
The unease was compounded by a quieter but no less significant signal: the shift of President Prabowo Subianto’s nephew, Thomas Djiwandono, from deputy finance minister to deputy governor of Bank Indonesia. Central banks derive their credibility not only from policy, but from distance from day-to-day politics, family networks, and executive power. In periods of market stress, even the perception that this distance is narrowing can matter. For investors already alert to issues of governance and elite concentration, the appointment reinforced concerns that Indonesia’s key economic institutions are becoming increasingly entangled with political dynasties.
Yet institutional turbulence was not the only signal unsettling observers. At the same time as markets were questioning formal governance, foreign diplomats were engaging a figure whose political legacy remains deeply contested: former president Joko Widodo.
In recent days, the Dutch ambassador travelled to Solo to meet Jokowi at his private residence, discussing potential cooperation between Indonesia and the Netherlands across various sectors. Shortly afterward, the United Arab Emirates ambassador did the same, also visiting Jokowi at his home, publicly describing him as a close friend and discussing ongoing collaboration, including in healthcare projects linked to Solo. These were not protocol-driven state meetings in Jakarta, nor courtesy calls to a retired elder statesman. They were deliberate engagements, outside formal channels, at a private residence.
Taken together, these visits suggest a pattern rather than coincidence. When multiple foreign envoys choose to meet a former president, at his home, not in office, it signals where they believe influence still resides. This is about recognition, not about nostalgia or personal warmth.
For many Indonesians, this recognition is troubling. Jokowi’s post-presidential status is not neutral. A growing segment of the public believes he pushed his politically inexperienced son into the vice presidency through ethically dubious means, including the manipulation of electoral rules via the Constitutional Court, then chaired by his brother-in-law.
Persistent allegations, whether legally resolved or not, about academic credentials and past conduct continue to circulate widely, shaping public perception. For civil society groups, activists, and communities who experienced democratic backsliding, shrinking civic space, or environmental harm during Jokowi’s tenure, these diplomatic gestures can feel like a quiet dismissal of their grievances.
To be clear, these ambassadorial visits did not cause the stock market crash. But symbols matter in moments of uncertainty. In political economies where informal power networks coexist uneasily with formal institutions, such symbolism carries weight. When foreign representatives appear to acknowledge an unelected figure as a continuing locus of influence, it reinforces the perception that power in Indonesia remains personal rather than institutional, and that accountability is optional.
This perception intersects uneasily with investor concerns. Markets are not moral arbiters, but they are highly sensitive to clarity. They price not only earnings, but governance: who decides, how rules change, and whether those rules apply equally. When the boundary between formal authority and informal influence becomes blurred, risk premiums rise.
The government’s response to the crash underscores this fragility. By Friday, markets had partially rebounded after officials announced plans to raise minimum free-float requirements to 15 percent and following the resignations of senior figures at the exchange and regulator. These moves calmed nerves in the short term. But their very necessity reveals the underlying problem: stability now depends on emergency signals rather than durable trust. A system that swings sharply on announcements is nervous, not resilient.
Raising free float is, in principle, a sensible reform. But on its own, it cannot resolve deeper issues of ownership transparency, enforcement, and political interference. Nor can personnel changes substitute for institutional credibility if informal power structures remain untouched. Investors understand this. Temporary rallies do not erase structural doubts.
What the events of this week demonstrate is not inevitable decline, but vulnerability. The problem with opaque systems is not that they fail constantly, but that when they fail, they do so suddenly. When ownership is unclear, oversight is reactive, and power is personalised, markets can appear calm, until confidence snaps. In such conditions, stability is provisional. Shocks require only a moment when accumulated doubts finally outweigh faith rather than extraordinary triggers.
This is why reducing the crash to technical factors misses the broader lesson. Low free float, thin trading, and data opacity matter because they are symptoms of a governance culture that tolerates concentration, secrecy, and elite privilege. The same culture shapes how public programs are designed, how information is disclosed, and how political dynasties consolidate power. Finance merely makes these dynamics visible.
The visits to Jokowi’s home in Solo, by both European and Middle Eastern diplomats, should be read in this light. They do not prove conspiracy, nor do they dictate policy. But they reflect an external reading of Indonesia’s political reality: that formal office is not the sole, or perhaps even the primary, source of authority. For a democracy seeking to reassure both its citizens and global investors, that is not a comforting message.
Indonesia does not lack potential. It lacks consistency between democratic ideals, institutional practice, and political behavior. Until that gap narrows, confidence will remain fragile, reforms will be reactive, and markets will remain exposed to sudden swings.
The stock crash, then, is not the story. It is the signal. And the signal is clear: this is not about markets being irrational. It is about governance, and always has been.
