Indonesia's Jakarta Composite fell more than 5% during trading on Oct. 19, touching a six-year low amid an MSCI review that could remove Indonesian shares from emerging-market benchmarks.
At $5.6 billion, the potential passive fund outflow would represent roughly 18 days of average trading volume among stocks in the MSCI Indonesia Investable Market Index. That scenario depends on Indonesia being fully removed from MSCI's emerging-market indexes. The estimate describes a possible outcome, not withdrawals that have occurred.
Trading paused for 30 minutes on Oct. 16 after an 8% opening decline; the index's intraday loss later topped 11%.
MSCI opened its review of Indonesia's index classification on Oct. 15, proposing to move its Indonesia indexes from emerging-market to standalone status. The proposal is under consultation, and MSCI has announced no effective date.
The index provider cited investors' concerns about share ownership that is difficult to assess and suspected coordinated trading. MSCI said those concerns can make it harder to determine how many shares are available for trading and to assess market prices.
Indonesian authorities have announced expanded ownership disclosures, including holdings above 1%, and a roadmap toward a 15% minimum free float. MSCI acknowledged the measures but said investors wanted evidence that they were being applied consistently across the market.
MSCI had raised possible frontier-market treatment in its June review. In October, it said feedback indicated that classification would not adequately reflect the concerns, and proposed standalone status instead.
During the consultation, MSCI will not add stocks to the MSCI Indonesia Investable Market Index, move stocks upward across size segments or increase Foreign Inclusion Factors or Number of Shares. It will accept feedback through April 30, 2027, and announce its decision on or before June 30, 2027.
