Indonesia Stocks Slump to Lowest Level Since 2020 on MSCI Warning — Update

By Amanda Lee

Indonesian stocks continued to slump and hit their lowest levels since 2020, weighed by concerns over the market's investability after index provider MSCI Inc. cautioned that the country could be removed from its indexes.

MSCI last week launched a consultation to possibly reclassify Indonesia's status from emerging-market to standalone. Such a move would exclude Indonesia's equities from several important indexes tracked by global funds and prompt selling by such funds. Feedback is due by April 30, 2027, with a final decision by MSCI expected by June 30.

Local authorities have sought to limit the fallout, with the Indonesia Stock Exchange saying on Monday that it has tightened its trading limits for individual stocks.

It has cut stocks' maximum daily decline to 7% from 15% through to the year end, subject to further evaluation in line with market developments, said the bourse.

Still, CIMB analysts said that the broader impact of a potential downgrade could spill over to delays in foreign direct investment commitments and renewed capital outflows from other local assets.

The stock exchange will seek further clarification about the considerations underlying MSCI's announcement, taking into account the various reform measures that have been undertaken.

The Jakarta Composite Index fell as much 5.4% to 4907.37, its lowest level since 2020, in early trade on Monday. It was recently 4.6% lower. That, together with Friday's 12% tumble, pushed the JCI's year-to-date losses to about 43%, making it one of the world's worst performing equity markets.

The proposed downgrade by MSCI was much worse than previously expected, said Capital Economics' Gareth Leather in a note.

"MSCI had earlier threatened to downgrade Indonesia to frontier-market status, but now argues that even this would understate the severity of the problems," said the senior Asia economist.

A full MSCI removal could trigger around $5.6 billion of passive outflows and another potential $2.7 billion if fellow index provider FTSE Russell makes a similar move, Goldman Sachs analysts said in a note.

The latest warning of an MSCI downgrade comes months after it said in January that it could downgrade Indonesia to frontier status due to investability and transparency concerns. That led to a nearly $80 billion market rout.

Write to Amanda Lee at amanda.lee@wsj.com

(END) Dow Jones Newswires

October 19, 2026 03:36 ET (07:36 GMT)