Jakarta. Indonesia’s stock market is showing signs of recovery after coming under pressure in recent months, with the benchmark Jakarta Composite Index (JCI) posting its strongest gain in weeks as investor sentiment improved and some external pressures began to ease.

The JCI climbed 4.12% to close at 6,254.96 on Monday, supported by renewed buying interest and improving conditions across domestic financial markets.

Rully Arya Wisnubroto, head of research and chief economist at brokerage Mirae Asset Sekuritas Indonesia, said the recent rally was still largely driven by a technical rebound, although improving fundamentals had also started to support the market.

“The current rally is still dominated by a technical rebound. However, the rebound is not without foundation,” Rully said in a research note released on Tuesday.

According to Rully, the stock market recovery has been supported by firmer monetary policy measures from Bank Indonesia and easing geopolitical tensions globally, both of which have helped stabilize the rupiah and government bond yields.

He said foreign capital flows remained selective, but the stabilization of the currency and reduced pressure in the bond market had improved investor confidence after months of volatility.

Indonesia’s financial markets had previously faced mounting pressure from a weakening rupiah, rising yields on government securities, and elevated global uncertainty, conditions that pushed up the country’s risk premium and weighed on equity valuations.

The JCI has plunged 36% from its record high just five months ago, making it the world's worst-performing major equity gauge this year, while the rupiah has weakened more than 7% against the US dollar.

However, as several market indicators began to improve, investor sentiment gradually turned more positive.

Rully said the sustainability of the JCI’s rebound would depend heavily on the movement of the rupiah and government bond yields in the coming months.

If the rupiah continues to strengthen and yields on 10-year government bonds gradually decline from their recent peak above 7.3%, Indonesia’s risk premium could fall further, potentially paving the way for renewed foreign inflows into both the bond and equity markets.

“That condition would create room for foreign funds to return to the bond and stock markets,” he said.

Rully added that investors would continue to monitor global market sentiment and the direction of monetary policy. Still, early signs of improvement in domestic financial conditions have raised hopes that confidence in Indonesian assets is slowly recovering.

With risk premiums declining and financial market conditions becoming more stable, analysts believe the JCI has greater room to extend its gains, particularly if foreign investors begin returning to Indonesia’s markets.