MSCI said on Friday that Indonesia's stock market is no longer appropriate as an emerging market and proposed moving it to 'standalone' status, which would exclude Indonesian stocks from indexes tracked by billions of dollars in passive investment. The Jakarta benchmark closed down 11.6%, its biggest one-day drop since January 1998, and about $60 billion in market value was wiped out that day, after more than $350 billion had already been lost since the January freeze in MSCI indexes. UBS estimated about $4 billion in passive outflows could follow, with active investors potentially adding $15 billion. Indonesian officials questioned why the downgrade was not discussed at a meeting in Bangkok, and the regulator OJK announced fines over alleged price manipulation of three listed firms. Moody's and Fitch had earlier this year cut their sovereign rating outlooks to negative, adding pressure on President Prabowo Subianto's government.
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