MSCI says Indonesia’s Barito Pacific will be removed from its indexes

Global index provider MSCI announced on November 9 that it will remove an Indonesian company, Barito Pacific, from its indexes, dealing a significant blow to the country's efforts to avoid a downgrade and maintain its emerging-market status. This follows MSCI's warning in October that Indonesian stocks could be removed from its indexes by the end of the year, marking a more severe outcome than the previous threat in January.

The removals will compel portfolio managers to sell the affected shares, taking effect after the close of trading on November 30.

Barito Pacific will be expelled from MSCI's global standard index, while Bumi Resources Minerals will be downgraded from the global index to the small cap index. Presently, the MSCI Indonesia index comprises nine firms, following the removal of six companies in May and two additional companies in August. The prospect of a downgrade has cast a dark cloud over Indonesian markets, with the benchmark index plummeting more than 40% in 2026, positioning it as the world's worst-performing major stock market.

In October, MSCI attributed Indonesia's deteriorating ownership transparency and curtailment of coordinated trading to the country's failure to enhance investor confidence, elevating the threat from a downgrade risk to a full-blown crisis.

Indonesian authorities have been striving to address MSCI's concerns throughout the year, tightening disclosure requirements and outlining plans to raise minimum free floats. In October, the regulator imposed sanctions for alleged manipulation, and earlier this week, the stock exchange lowered the market capitalization threshold for screening companies breaching high shareholding concentration rules.

MSCI is currently seeking feedback on its reclassification proposal until April 30, 2027, with a final decision by June 30, 2027. However, analysts are apprehensive that many active investors may depart Indonesia before the deadline. Foreign investors have already withdrawn $5.4 billion from Indonesian equities in 2026. According to Goldman Sachs, MSCI's removal of the country's stocks from its indexes could trigger $5.6 billion in passive outflows.

Indonesia has been an MSCI emerging market since 1989, and a downgrade would represent a significant reversal for a market that until recently was favored by foreign investors. Over $1.8 trillion in assets are benchmarked to MSCI's emerging-market indexes, according to the index provider's website.