Indonesian stocks plunge after MSCI proposes cutting market's status
Indonesia's main stock index fell more than 11% on Friday after index maker MSCI proposed moving the country out of its emerging markets group, CNA and The Business Times reported. MSCI said worries about who owns shares and how they trade remain. Indonesia's stock exchange said it will ask MSCI to explain.
Indonesian stocks suffered one of their worst days in decades on Friday after index provider MSCI proposed moving the country from emerging-market status to "standalone" status, The Business Times and CNA reported.
The Jakarta Composite Index dropped 8% at the open, setting off a trading halt that lasted 30 minutes, The Business Times reported. It closed down 11.57% at 5,185.10, CNBC Indonesia reported. CNA said the fall was the index's heaviest since early 1998. The rupiah weakened past 18,000 per U.S. dollar, both outlets said.
MSCI said in a statement that "significant concerns remain around market dysfunction" and that Indonesia's emerging-market classification is "no longer appropriate," CNA reported. The index maker cited unclear shareholding structures, suspected coordinated trading and a lack of evidence that reforms have made a real difference, The Business Times said.
Standalone status would take Indonesian stocks out of MSCI's emerging and frontier market indexes, which could push funds that track them to sell. UBS estimated a removal could trigger about $4 billion in passive outflows, with active investors possibly pulling a further $15 billion, CNA reported. Harry Su of Samuel Sekuritas Indonesia told The Business Times that a direct drop to standalone would be rare and severe.
The Indonesia Stock Exchange said it has worked with regulators to improve transparency and will seek more details from MSCI, both outlets reported. The exchange stressed that the proposal is part of a consultation and not a final decision, CNA reported. Senior economic minister Airlangga Hartarto said there was "a big question mark" over why MSCI did not raise the idea at a meeting this week, CNA reported.
MSCI is taking feedback until April 30, 2027, and plans to announce a final decision by June 30, 2027, The Business Times reported.
What we know: MSCI has proposed moving Indonesia to standalone status, and the market fell sharply on Friday.
What we don't: Whether Indonesia's reforms will change MSCI's final decision next year.
Where outlets agree The Business Times and CNA both report that MSCI proposed moving Indonesia to standalone status and that the market fell 8% at the open, setting off a trading halt.
Where they differ The outlets cited here report the same key facts so far.