Dear Reader,I’ve been watching Indonesian stocks for a few years now. With public debt to GDP of just 41%, projected real GDP growth of ~5%, and MSCI Indonesia trading at a forward P/E of 8.4 there are potentially decades of outperformance ahead. Indeed, some of the more astute Asian fund managers have been wildly bullish. [Not to put them on blast, but Pangolin had 49% of NAV in Indonesia as of June 2026, with a 21-year track record of 8.0% CAGR vs the ASEAN Index’s 4.5%.]Of course, there’s a catch: everything has kinda’ gone to crap. It’s been a perfect storm:- Without going into details, there were reforms — starting in 2018 — that effectively forced a lot of (state-run) investment firms to switch into bonds because they can now be legally liable for any losses. You can see the impact very clearly, with domestic institutions and foreign investors retreating from the market as retail has filled the gap:- The elevated retail participation set the stage for a lot of weird market activity (manipulation, frothy meme stocks, etc.) that recently drew the attention of index provider MSCI earlier this year. MSCI threatened to downgrade Indonesia from Emerging Market to Frontier Market in January, leading to a 10% drop in the index in one day as investors rushed to the exit ahead of more potential force selling! - The war in Iran further pressured the Indonesian markets and currency as Indonesia imports roughly 2% to 3% of its GDP in oil and refined products. The Rupiah is down over 8% versus the dollar YTD. - The pressure on the Indonesian economy dovetailed into desperate actions President Prabowo, whose presidency has already been an epic mess. Basically he started talking about nationalizing resources, got caught in several corruption scandals, and most recently he confirmed the worst suspicions by suggesting a wealth tax. There are reports of wealthy families liquidating their Indonesian stocks to move the money offshore in Singapore.It’s gotten pretty bad; there’s no sugarcoating it. But in crisis, there is often opportunity. Anybody remember when Russia was “on the verge of invading Poland”? Yeah:My view is that the MSCI issues are probably behind us (with market reforms already on the way and MSCI punting their decision to November), but the political regime could easily deteriorate. A quick thought on the currency: I’m no currency expert, so please take this with a grain of salt. I take an old-fashioned view to currency markets. I believe that a company’s fiscal position (namely, debt to GDP) and long-term real growth prospects are generally the most important factors. In contrast, modern markets tend to place a lot of emphasis on real interest rate differentials, which attract shorter-term speculators. As a contrast, consider that India’s public debt to GDP is over 80% — double that of Indonesia — while targeting a deficit of well over 4% of GDP (Indonesia has a statutory cap at 3%). To me this suggests that Indonesia actually has quite a bit of breathing room to leverage up and stimulate their economy before entering typical Banana Republic doom loop currency dynamics.How to invest? Unfortunately for U.S. investors, the only broker I am aware of that provides access to direct listings is Schwab, which requires calling in and paying exorbitant fees. The ETFs (IDX US and EIDO US) are pretty bank-heavy and Pangolin has commented that it doesn’t own any of the top 10 weighted stocks in the ETF, but the flipside is that institutional money will probably flood into those stocks first when the tide turns. As far as single names, I have the following ideas (currently, my exposure is 0 but I consider buying nearly every night):My top idea: Pakuwon (PWON JK). At .5x tangible book value with a 5%+ dividend, this family-managed property developer builds superblocks. A superblock is basically a bespoke development that integrates hotels, condos, offices, and malls. These superblocks are absolutely irreplaceable, timeless assets. Zooming out, I would just note that Class A malls have proven be an excellent, resilient asset class around the world. Foreign-controlled: If you’re more concerned about local governance/management, you can invest in foreign-controlled corporations that pay out huge dividends.HMSP JK, controlled by Philip Morris, trades at ~9x forward earnings and pays out most of that as a fat dividend every year. Regulation has trended against cigarettes, though, with the legal smoking age increasing to 21 in 2024. INTP JK, controlled by Heidelberg Cement, just paid out a huge special dividend and also trades at ~9x forward earnings. But my cement guy says that the cement market in Indonesia structurally sucks, so I’d like to see this thing totally blown out before I consider picking up shares. Apolitical: MLBI JK is the local beer company, trading at ~10x forward earnings. I’ve long held the belief that regional beer companies are a good way to sidestep political issues because I see that as something that’s just not worth pissing people off over. Political tailwinds: One of Prabowo’s headline policies is about free food/lunches. ULTJ JK is a small cap dairy company potentially flying under the radar at ~8x forward earnings.Blue chip: Alfamart (AMRT JK) operates convenience stores. Pangolin likens the stock to Walmart, suggesting a long runway for growth. At ~14x forward earnings I’m kind of skeptical, but I’m a notorious cheap-o.