Indonesia gets a ’wake-up call’ as MSCI prepares to expel it from global indexes

Indonesia's stock market has received a "wake-up call" from MSCI, which is considering expelling the country from its global indexes. The move, which came after MSCI deemed Indonesia's market still insufficiently improved despite reforms, caused the Jakarta share index to plunge 11% and the rupiah to weaken sharply. The benchmark index, already the world's worst performer this year, fell to a six-year low.

MSCI's proposal to downgrade Indonesia to standalone status, rather than emerging market, could trigger $4 billion in passive outflows, with active investors potentially adding another $15 billion. Indonesia's economic minister expressed concern over the decision, and the country's top officials gathered to discuss the announcement.

Market participants rushed to sell their positions, causing a 30-minute trading halt at the opening of the Jakarta exchange. This is the first time in over 20 years of the reporter's experience in the stock market that such a reaction has occurred.