{
  "id": 17151585,
  "title": "Keeping emerging market status: Lessons from 1998",
  "url": "https://urgent.news/2026/10/30/keeping-emerging-market-status-lessons-from-1998",
  "topic": "finance",
  "section": "Finance & Markets",
  "published": "2026-10-30T00:07:07.000Z",
  "source": {
    "name": "The Jakarta Post",
    "slug": "the-jakarta-post",
    "url": "https://www.thejakartapost.com/opinion/2026/10/30/keeping-emerging-market-status-lessons-from-1998.html"
  },
  "original_language": "en",
  "account": "Indonesia faces the threat of losing its Emerging Market status, a status it held with pride for many years. In October 1998, the nation narrowly avoided a humiliating downgrade after learning a hard lesson from the Asian financial crisis. The crisis made it clear that financial markets can endure bad news but not the uncertainty that stems from unchecked market volatility. For a market to function properly, asset valuations must be transparent, enabling capital to be priced, managed, and deployed. When transparency is lost, capital flees. This principle is becoming increasingly relevant as MSCI, a leading market data and analytics company, initiates a consultation on downgrading Indonesia from its Emerging Market status.\n\nThe sudden move sent shockwaves through the market. The Jakarta Composite Index, a key barometer of the Indonesian stock market, plummeted by nearly 11 percent on the first day alone, marking its steepest single-day decline in two decades. The government's defense of its sovereignty, led by President Prabowo Subianto, is understandable. However, true national strength requires confronting domestic market vulnerabilities and implementing structural reforms.\n\nIndonesia's share in the MSCI Emerging Markets Index, which historically stood at around 3 percent, has plummeted to a mere 0.46 percent. This decline is starkly contrasted by regional peers like Malaysia and Thailand, which maintain larger shares. The situation is even more dire when compared to China, which holds nearly 20 percent of the index. Indonesia's presence in the index has plummeted from 1.16 percent in late 2025 to 0.46 percent, with the number of Indonesian corporations listed in the index falling from eighteen to just nine.\n\nThe consequences of this decline are far-reaching. The Jakarta Composite Index has dropped by approximately 39 percent year-to-date. Foreign portfolio outflows have surged past Rp 88 trillion ($4.84 billion) by mid-October. This outflow of capital has led to an 8 percent depreciation of the rupiah against the US dollar. In response, rating agencies Moody’s and Fitch have both downgraded Indonesia's sovereign credit rating outlook to negative.\n\nThe economic implications of this situation are severe. More than $2.2 trillion in institutional capital tracks or benchmarks against the MSCI Emerging Markets Index. Indonesia's global weight within this index has dwindled significantly from 3 percent to just 0.46 percent. This decline has been more than half since late 2025, and the number of Indonesian corporations listed in the index has dropped from eighteen to just nine. In contrast, China holds nearly 20 percent of the index, demonstrating the scale of Indonesia's decline.\n\nIndonesian stocks have seen a significant outflow of foreign institutional assets, collapsing from an estimated $25 billion to around $10 billion. The macroeconomic fallout is already impacting the broader financial system. The Jakarta Composite Index has declined by around 39 percent this year. Foreign portfolio outflows have reached over Rp 88 trillion ($4.84 billion) by mid-October. As foreign funds liquidate their holdings in local equities, the demand for foreign exchange has driven the rupiah down by 8 percent against the US dollar. Moreover, both Moody’s and Fitch have revised Indonesia's sovereign credit rating outlook to negative, signaling increased risk for international investors.",
  "summary": "To save Indonesia from a humiliating market downgrade, policymakers must abandon defensive rhetoric and deploy the painful, proven audit blueprint that rescued the nation’s banks in 1998.",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}