Indonesia Stock Index Hits Six-Year Low Over MSCI Proposal

Indonesia's benchmark stock index fell more than 5% on Monday, dropping to its lowest level since October 2020. The decline follows a proposal by MSCI to reclassify Indonesia from an emerging market to stand-alone status, a move that could remove the country from major global equity benchmarks. A final decision on the reclassification is expected by June and depends on improvements in market transparency and governance.

Goldman Sachs warned that a full removal from MSCI indexes could trigger $5.6 billion in passive fund outflows. An additional $2.7 billion is at risk if FTSE Russell follows with similar action. Foreign investors have already withdrawn a net $5.1 billion from Indonesian equities this year, bringing foreign ownership down to 25% in October.

Goldman Sachs maintains an underweight rating on the market, citing macroeconomic headwinds and weak corporate earnings. The firm also predicts the central bank will raise interest rates twice more through the first quarter of 2027.