Indonesian stocks plunge to six-year low as MSCI downgrade fears mount
Indonesia's benchmark stock index plunged to its lowest level in six years.
TL;DR
- Indonesia's benchmark stock index (Jakarta Composite Index) fell over 5% to its lowest level since October 2020.
- MSCI proposed reclassifying Indonesia from 'emerging market' to 'stand-alone status', potentially removing it from global benchmarks.
- A final MSCI decision is expected by June, dependent on improvements in market governance and transparency.
- Goldman Sachs estimates potential passive fund outflows of $5.6 billion if removed from MSCI emerging-market indexes.
- An additional $2.7 billion could be at risk if FTSE Russell follows suit.
- Foreign investors have withdrawn a net $5.1 billion from Indonesian equities this year.
- Foreign ownership of Indonesian stocks has decreased, and the value of foreign holdings has nearly halved.
- Goldman Sachs maintains an 'underweight' rating on Indonesian equities due to ongoing uncertainty, weak earnings, and macroeconomic headwinds.
- Strategists anticipate Indonesia's central bank to raise interest rates twice more in late 2026 and early 2027.