News about Indonesia

Indonesian stocks slid to a six-year low in a record two-day rout, falling 11.6% on Friday and more than 5% on Monday, after MSCI said it was considering shifting Indonesia to 'standalone' status from next year. The exchange halved its down limit to 7% to try to slow the selling. The rupiah weakened to 18,040 per dollar, near the record low of 18,190 hit in June, while the 10-year bond yield rose to 7.4%. Goldman Sachs estimates a full MSCI removal could trigger $5.6 billion of passive outflows, and foreign investors have net sold $4.88 billion of Indonesian stocks so far this year. S&P Global said the outflows were unlikely to materially raise financing costs, but damage to investor confidence was the bigger concern.

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.