Indonesia's Sovereign Fund Sticks to Investment Strategy Amid Market Turmoil — Update

By Ying Xian Wong and Amanda Lee

Indonesia's sovereign wealth fund said it remains confident in its investment strategy after a downgrade warning from index provider MSCI sparked another rout in local markets.

"Our conviction in Indonesia remains grounded in its economic fundamentals and the strength of its businesses," a spokesperson for the fund said.

Known as Danantara, the fund manages about $1 trillion in assets and is maintaining its approach to allocating investments at home and abroad.

MSCI's concerns highlight market-governance issues that need to be addressed, but those should be distinguished from Indonesian companies' underlying investment potential, the spokesperson said.

"MSCI's assessment has not changed our long-term confidence in Indonesia's capital markets," they added.

The remarks follow a selloff in Indonesian assets after MSCI warned last week that it could reclassify the Southeast Asian country as a standalone market, citing insufficient progress in addressing concerns over market transparency and investability.

That would exclude Indonesian stocks from several major indexes tracked by global funds, and marked an escalation from when MSCI said Indonesia could lose its emerging-market status in January.

The benchmark Jakarta Composite Index and the rupiah tumbled after the latest warning, with stocks experiencing their steepest drop since the 1998 Asian financial crisis. Sentiment later stabilized as authorities announced measures to improve transparency and restore investor confidence.

The index ended this week 4.9% higher, but year-to-date losses stand at 37%, making it one of the worst-performing emerging markets.

At a press conference on Thursday, Danantara's chief investment officer said the fund is prepared to pump more in capital into the stock market.

Danantara has bought domestic shares it considers attractive and intends to continue buying as long as valuations remain compelling and growth prospects sound, CIO Pandu Sjahrir said.

Danantara sees the Indonesian market as offering an "attractive risk-reward" profile right now, said Pandu. "We want to own more of some of these shares."

The fund continues considering overseas opportunities too, as international diversification is a complementary part of its investment strategy.

Launched in February 2025, Danantara made its first foreign investment in June of that year, taking a $120 million stake in a Philippine solar project.

To that end, the fund is eyeing investment opportunities and partnerships in the U.S. and North Asia, Pandu said in a recent interview.

It will disclose 2027 investment plans in January or February, he added.

North Asia is a "great place to look at" given its role in the artificial-intelligence supply chain, Pandu said. Healthcare and energy security are also on the radar.

In the U.S., the fund is exploring technologies tied to energy efficiency and new energy sources for investment opportunities.

"We'll also look at [U.S.] sectors related to artificial intelligence or super intelligence," Pandu said.

Over the next six to 12 months, Danantara will prioritize energy and downstreaming investments, the CIO said.

For market watchers, focus will remain on what reforms Indonesian regulators make to address the concerns raised by MSCI. Those same worries have been echoed by credit agencies too, as well as fellow index provider FTSE Russell.

With MSCI's final decision expected by June 30, analysts expect Indonesia to step up its capital-markets overhaul to prevent a downgrade.

Failure to do so could trigger further foreign fund outflows, weighing on the country's currency and financial markets, Kenanga economists said in a recent note.

Write to Ying Xian Wong at yingxian.wong@wsj.com and Amanda Lee at amanda.lee@wsj.com

(END) Dow Jones Newswires

October 23, 2026 07:43 ET (11:43 GMT)