Indonesia Stocks Rebound as Authorities Step Up Response to MSCI

Indonesian markets experienced a slight rebound on October 20, following a record two-day US$82 billion rout triggered by MSCI's warning of potential removal from global indexes. The Jakarta benchmark index climbed 3% on October 20, after plummeting to a six-year low the previous session as the market lost 14.8% over October 16 and 19.

MSCI had indicated on October 16 that it was contemplating a move of Indonesia from "emerging markets" to a more severe "standalone" status, a downgrade that caught investors and authorities off guard. To curb the heavy selling, which has left the market down around 40% in 2026, the stock exchange reduced the daily down limit on prices from 15% to 7% and imposed a 1 rupiah downward cap on shares priced at 14 rupiah or less.

The index provider's warning weighed on the rupiah as well, which slightly strengthened to 18,010 per US dollar on October 20 but stayed near its June record low of 18,190. Jakarta officials met with MSCI on October 19 to inquire about the index provider's latest warning, which arose from concerns over Indonesia's lack of progress in ownership transparency and crackdowns on coordinated trading.

On October 19, President Prabowo Subianto held discussions with finance officials, including the head of the Financial Services Authority, the finance minister, and the central bank governor. OJK chief Friderica Widyasari Dewi stated that the regulator would persist with capital market reforms, focusing on transparency, liquidity, and enforcement against coordinated trading and other violations.

The regulator announced sanctions against individuals involved in trading manipulation related to three firms on October 16, with fines totaling 2.1 trillion rupiah (S$150 million). The Indonesia Stock Exchange also vowed to exclude stocks with a high degree of ownership by a single person or entity from its benchmark index. Jeffrey Hendrik, president director of IDX, emphasized the continued efforts to enhance transparency, market credibility, and governance.

Fitch Ratings' George Xu, commenting on the latest concerns and market sell-off, noted that the rating agency's negative outlook revision in March still posed risks, but external pressure could increase government borrowing costs and diminish external buffers.