Indonesia's benchmark index fell over 5% on Monday to its lowest since early October 2020, as fears grew that MSCI could downgrade the market. On Friday MSCI proposed reclassifying Indonesia from emerging-market to stand-alone status, with a final decision expected by June that hinges on governance and transparency improvements. Goldman Sachs estimates a full removal from MSCI's emerging-market indexes could trigger about $5.6 billion in passive outflows, with a further $2.7 billion at risk if FTSE Russell follows. The MSCI Indonesia Index has fallen 47% this year, foreign investors have net sold $5.1 billion, and foreign ownership has dropped from 27% in January to 25% in October. Goldman keeps an underweight rating, warns Indonesian equities may not have bottomed, and expects the central bank to raise rates twice more by 25 basis points in Q4 2026 and Q1 2027.
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