Global Markets
Jakarta stocks rebound after a near-15% two-day rout as Indonesia races to head off an MSCI downgrade
The exchange tightened price limits and moved to strip concentrated-ownership stocks from its benchmark after MSCI said it was weighing a cut to standalone status.
HedgeWeekly News Desk ·
Indonesian equities rose more than 4% on Tuesday, bouncing from a six-year closing low after losing nearly 15% over the previous two sessions. The rally came as Jakarta stepped up its response to MSCI, which said on October 16 it was reviewing whether to move Indonesia from emerging-market to standalone status.
MSCI pointed to opaque ownership structures and suspected collusive trading, and said steps taken by authorities this year had not gone far enough. A standalone label would sit two notches below the frontier-market reclassification MSCI had flagged in January. The index provider has said a final decision will come by June 2027.
The Indonesia Stock Exchange halved the maximum daily fall allowed for individual shares, to 7% from 15%, through the end of the year, and moved to drop stocks with highly concentrated shareholdings, which account for about 18% of the benchmark's weight. It also plans tighter disclosure for anyone holding 1% or more of a company. The financial regulator, OJK, said it had found evidence of manipulation in three companies' shares and IPO allocations, and authorities announced fines of about $117 million.
For allocators, the review is a live index-flow event. Goldman Sachs has estimated about $5.6 billion of passive outflows if Indonesia were removed from MSCI's indexes entirely, and another $2.7 billion if FTSE Russell followed. Foreign investors had already sold a record net $5.1 billion of Indonesian stocks this year, and the selloff spilled into bonds, with the 10-year yield touching 7.47% intraday on Monday. Whether the new rules satisfy MSCI on free float and ownership transparency is the key question before the June 2027 deadline.