Indonesian stocks continue to plunge as MSCI downgrade fears deepen

Global index provider MSCI is considering downgrading Indonesia's stock market to standalone status from emerging market, which would result in a $65 billion market value loss on the day of the announcement. This follows MSCI's concerns about Indonesia's investability of equities since January. Jakarta responded by promising market reforms, but MSCI stated that Jakarta has not made sufficient progress in implementing market reforms.

Additionally, MSCI cited weak enforcement and opaque shareholding structures as concerns. Despite these issues, MSCI had extended its review of Indonesia from June to November. However, MSCI announced last week to initiate a process to move Indonesia to standalone status, despite the announced reforms. MSCI stated that significant concerns remain around market dysfunction, including suspected coordinated trading behavior and lack of evidence of meaningful enforcement. Jakarta has until April 30, 2027, to address MSCI's concerns to prevent a market reclassification.