Indonesian stocks dive 11pct as MSCI weighs market reclassification
HONG KONG: Indonesian stocks plunged more than 11 per cent Friday as index compiler MSCI said it was "no longer appropriate" to maintain the country's emerging-market status, fuelling fears of an exodus of foreign investment.
Jakarta, Indonesia - Indonesian stocks plummeted over 11 percent on Friday as MSCI, the index compiler, announced it would no longer consider the country an emerging market. This decision, announced earlier this year, has sparked fears of a potential exodus of foreign investment. MSCI cited ongoing opacity in shareholding structures and coordinated trading behavior affecting price information as reasons for the downgrade.
Despite reforms announced by Jakarta in April, MSCI claims that sufficient progress has not been consistently observed across the Indonesian equity market. The index maker believes Indonesia's continued classification as an Emerging Market is no longer appropriate and has launched a consultation to propose a reclassification to a Standalone Market.
A Standalone classification could force investment funds tracking MSCI's emerging market indices to sell Indonesian holdings. Currently, only Argentina, Lebanon, and Palestine hold the same designation, with no Asian markets currently included. The Jakarta Composite Index plunged eight percent at the opening bell, causing a trading halt, before closing 11.1 percent lower, its worst fall since early 1998 and its lowest level since 2020.
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