Why is the Jakarta Stock Exchange Composite Index sliding to a six-year low today?

The Jakarta Stock Exchange Composite Index has plummeted to a six-year low of 4,921.74 points on Monday, extending a severe market sell-off that began last week following MSCI’s decision to reclassify Indonesia's equity market from emerging-market to standalone-market status. This proposal, currently under consultation with global market participants, could see Indonesia bypass frontier-market status and join the ranks of Jamaica, Panama, and Palestine.

Goldman Sachs warned that a full removal from MSCI's emerging-market indexes could result in $5.6 billion in passive fund outflows, while $2.7 billion could be at risk if FTSE Russell also takes action. Active funds benchmarked to MSCI and FTSE indexes hold over $8 billion in Indonesian equities, though any selling by these investors would be discretionary rather than automatic.

The rupiah has weakened to 18,000 per dollar, nearing the record low reached in June, adding to investor concerns. Indonesia's exchange and financial regulators are seeking clarification from MSCI in an effort to mitigate the fallout and restore confidence. MSCI sees Indonesia's emerging-market classification as no longer appropriate and intends to proceed with the reclassification unless consultation reveals significant improvements in market governance and functioning.

Feedback from market participants is being accepted until April 30, 2027, with a final decision expected by June 30, 2027.