- Indonesia’s JCI fell 5.1% to a six-year low, with two-session losses near $90 billion.
- MSCI’s proposed downgrade could trigger $4 billion in passive outflows, UBS estimates.
- IDX cut its daily stock decline limit to 7% as the rupiah weakened past 18,040 per dollar.
Indonesian stocks fell to a six-year low as investors sold shares following MSCI’s proposal to remove the country from its emerging-market indexes, extending a decline that prompted tighter trading limits and urgent discussions between exchange officials and the index provider.
The Jakarta Composite Index dropped by 5.1% to 4,921.74 during trading, slipping below 5,000. Friday’s 11.57% decline had taken the benchmark to approximately 5,185, marking its largest daily fall since the 1998 Asian financial crisis.
The two-session decline erased roughly $90 billion in market value. Its figures also put October’s decline at approximately 19%, with Indonesian stocks now down about 40% since the start of the year.
MSCI Downgrade Proposal Raises Capital Outflow Risks
At the center of the selloff is MSCI’s proposed shift from emerging-market to standalone status. The proposal would bypass frontier classification and exclude Indonesian shares from major global benchmarks tracked by investment funds.
MSCI cited opaque ownership structures, suspected coordinated trading and insufficient evidence of meaningful enforcement. The index provider said announced reforms had not consistently produced material improvements in market functioning.
The proposal remains under consultation, with a final decision due by June 2027. Funds tracking affected benchmarks would have to sell Indonesian holdings if the reclassification takes effect.
UBS estimated that exclusion could lead to roughly $4 billion in passive outflows, with active investors potentially withdrawing another $15 billion. Separately, Goldman Sachs estimated passive outflows could reach $5.6 billion.
Exchange Tightens Limits as Rupiah Weakens
The Indonesian Stock Exchange reduced its daily stock decline limit to 7% on Monday. Exchange leaders also arranged discussions with MSCI executives to seek clarification and address the concerns behind the proposed reclassification.
Those talks followed regulatory fines totaling 2.1 trillion rupiah, or approximately $116.4 million, against parties linked to alleged market manipulation. The sanctions came as scrutiny intensified over ownership transparency and coordinated trading.
Meanwhile, the rupiah weakened beyond 18,040 per dollar. Oil prices above $110 a barrel added pressure on Indonesia, a net oil importer, alongside concerns about inflation and possible interest rate increases.
Japan and South Korea Face Separate Losses
The losses followed declines elsewhere in Asia. Japan’s Nikkei fell by about 2% at Monday’s open after a U.S. technology selloff, while rising oil prices added pressure through higher energy import costs.
The report put the decline in Japanese equity value at more than ¥23.5 trillion, equivalent to approximately $150 billion. South Korea’s KOSPI fell by 14.46% during the preceding week, its worst weekly performance since the 2008 global financial crisis.
Related: Indonesia Stock Market Crash: Will MSCI Downgrade Warning Trigger More Foreign Investor Outflows?
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