Indonesia risks rare MSCI exclusion and loss of global capital
A WARNING from MSCI that it may exclude Indonesia from its stock market indexes — benchmarks used by global financial investors — risks cutting the nation off from international capital and relegating it to an investment backwater.
Indonesia may face a rare MSCI exclusion from its stock market indexes, potentially cutting the nation off from global capital. MSCI proposed removing Indonesia from its global stock indexes due to opaque ownership and securities trading practices, a move that would be unprecedented. This would place Indonesia in a small group of standalone markets, alongside Lebanon and Zimbabwe.
The downgrade would be a significant reversal for Indonesia, which has been an MSCI emerging market since 1989. The proposal is more severe than previously considered and could cause a major setback for a market that was once popular with foreign investors. MSCI's move would have far-reaching consequences, with the rupiah falling and banks estimating US$3 billion to US$6 billion in passive outflows.
The country's public finances could also be affected, with state-linked companies potentially finding it harder to raise money. MSCI has given Indonesian authorities until next April to address its concerns, with a final decision due by June. Indonesian authorities have taken steps to address MSCI's concerns, but the deputy coordinating minister for economic affairs emphasized that MSCI is not always correct.
Written by urgent.news from New Straits Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
