Jakarta Stocks Hit Six-Year Low as MSCI Downgrade Looms — SkimNews
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- Jakarta Composite Index plunged over 5% Monday to its lowest level since early October 2020, extending a bruising sell-off in Indonesian equities.
- MSCI proposed Friday reclassifying Indonesia directly from emerging-market to stand-alone status, with a final decision expected by June contingent on Indonesian authorities demonstrating improvements in market governance and transparency.
- Goldman Sachs warned that 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—with an additional $2.7 billion at risk if FTSE Russell takes similar action.
- The MSCI Indonesia Index has fallen 47% year-to-date through Friday, with foreign investors withdrawing a net $5.1 billion over the period.
- Foreign ownership of Indonesian stocks declined to 25% in October from 27% in January, while the value of those holdings nearly halved from approximately $250 billion to $130 billion.
- Goldman strategists led by Alvin So maintained their underweight rating on Indonesian equities—citing index uncertainty, weak corporate earnings and macro headwinds—and expect Bank Indonesia to raise rates twice more by 25 basis points each in Q4 2026 and Q1 2027.
Why it matters: Indonesia has until June to convince MSCI that market governance has meaningfully improved, or face roughly $5.6 billion in passive emerging-market outflows plus another $2.7 billion if FTSE Russell follows—a combined $8.3 billion hit after foreign holdings have already lost about $120 billion in value this year. Goldman Sachs's underweight call signals the bank sees no re-rating catalyst even after a 47% YTD decline, and its forecast of two more 25-basis-point rate hikes from Bank Indonesia adds another drag on equity valuations.
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