Indonesian stocks plunge to six-year low as MSCI downgrade fears mount - CNBC
Indonesia's stock market has dropped to a six-year low following fears that MSCI may downgrade the country's market status. Analysts warn that such a reclassification could trigger billions of dollars in foreign investor outflows.
Why it matters
A potential MSCI downgrade threatens Indonesia's financial stability and could significantly impact emerging market investment flows globally.
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.
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