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

Indonesian stocks plunged to a six-year low on Monday, after a warning from MSCI raised concerns over potential expulsion from global indexes next year. Jakarta's benchmark index dropped over 5% in early trading, following an 11.6% decline on Friday. The MSCI threat has intensified focus on how Jakarta plans to address the index provider's concerns.

The Indonesia Stock Exchange reduced its auto-rejection limit to 7% from 15% to give investors time to assess the situation. Fines totaling 2.1 trillion rupiah were announced for those involved in suspected trading manipulation, signaling the Indonesian regulator's ongoing efforts against market abuse. Analysts and experts note that avoiding reclassification requires clear evidence of consistently improved market functioning, while a full MSCI removal could result in US$5.6 billion in passive outflows.

Foreign investors have already netted US$4.88 billion in sales of Indonesian stocks this year, reflecting the challenging environment for capital inflows.