Indonesia's benchmark stock index plunged over 5% on Monday to its lowest level in six years, as concerns over a potential downgrade by MSCI intensified fears of further foreign investor outflows.
The Jakarta Composite Index tumbled to its lowest level since early October 2020, extending a bruising sell-off in Indonesian equities. MSCI, the index provider, on Friday proposed reclassifying Indonesia directly from an emerging market to stand-alone status, raising the prospect of the country's removal from major global equity benchmarks.
MSCI is expected to make a final decision by June, with the potential reclassification hinging on whether Indonesian authorities can demonstrate meaningful improvements in market governance and transparency.
Goldman Sachs warned in a Sunday note that a full removal from MSCI's emerging-market indexes could trigger approximately $5.6 billion in passive fund outflows, equivalent to 18 days of average daily trading volume for constituents of the MSCI Indonesia Investable Market Index.
An additional $2.7 billion could be at risk if FTSE Russell subsequently takes similar action, although the bank stressed that such a move would be a separate scenario.