Indonesian Stocks Fall to Six-Year Low Amid MSCI Reclassification Fears
The Jakarta Composite Index fell over 5% on Monday, reaching its lowest level since early October 2020. The decline was driven by concerns that MSCI may reclassify Indonesia from an emerging market to a standalone status, potentially removing it from major global equity benchmarks. A final decision is expected in June and will depend on improvements in governance and transparency. Goldman Sachs warned that such a downgrade could lead to $5.6 billion in passive fund outflows, equivalent to 18 days of average trading volume for MSCI Indonesia constituents. An additional $2.7 billion may be at risk if FTSE Russell follows suit. Active funds hold over $8 billion in Indonesian equities but would not automatically sell on a downgrade. The index has already dropped 47% this year, with foreign investors withdrawing nearly $5.1 billion since January and reducing their holdings to approximately $130 billion from $250 billion.
Topics: foreign investment outflows global equity benchmarks Indonesia stock market MSCI