Indonesian stocks slide to six-year low as MSCI warning weighs

Indonesian stocks plummeted to a six-year low on Monday (Oct 19) as the MSCI warned of potential expulsion from its global indexes next year, causing investor uncertainty and emphasizing the need for Jakarta to address MSCI's concerns. The benchmark stocks plummeted over 5% in early trading, after falling 11.6% on Friday, due to MSCI's consideration of detaching Indonesia from its emerging markets classification.

This move could strip Southeast Asia's largest economy of international capital access, relegating it to an investment backwater alongside countries like Lebanon and Zimbabwe. The severe outcome has intensified pressure on Indonesia's authorities and finance officials. The Indonesia Stock Exchange temporarily lowered its auto-rejection limit to 7% from 15% to enable investors to evaluate available information.

Following a weekend meeting between the regulatory body and market participants, Jakarta announced sanctions against individuals involved in alleged trading manipulation, totaling 2.1 trillion rupiah (US$116.4 million). Goldman Sachs estimates a full MSCI removal could result in US$5.6 billion of passive outflows, with active funds holding over US$8 billion in these indexes.