Indonesia’s Jakarta index falls more than 5% to a six-year low — CNBC

In Indonesia, the benchmark Jakarta Composite stock index lost more than 5% on Monday, falling to its lowest level since early October 2020. The sell-off intensified amid investor concerns about the country’s possible exclusion from key international stock indices, CNBC reports.

MSCI proposal

Index provider MSCI on Friday proposed moving Indonesia from emerging-market status directly to the standalone market category. Such a move could mean the removal of Indonesian stocks from major global benchmarks.

A final MSCI decision is expected by June. The possibility of reclassification will depend on whether Indonesian authorities can demonstrate significant improvements in market governance and transparency.

Estimates of possible capital outflows

Goldman Sachs analysts warned that Indonesia’s full exclusion from MSCI emerging-market indices could trigger about $5.6 billion in outflows from passive funds. By their estimates, this is equivalent to 18 days of average daily trading volume in stocks of companies included in the MSCI Indonesia Investable Market Index.

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Another $2.7 billion could be at risk if FTSE Russell separately makes a similar decision. Goldman Sachs also estimated the value of Indonesian stocks in the portfolios of active funds benchmarked against MSCI and FTSE indices at more than $8 billion, emphasizing that their sale would not be automatic.

According to the bank, the MSCI Indonesia index had fallen 47% from the start of the year through last Friday, while net foreign outflows from Indonesian equities amounted to $5.1 billion. The share of foreign ownership in the country’s stock market declined from 27% in January to 25% in October, while the value of such assets fell from approximately $250 billion to $130 billion.

Goldman Sachs maintained its “underweight” recommendation for Indonesian stocks in portfolios, citing index uncertainty, weak corporate earnings, and macroeconomic factors. The bank’s strategists also expect Indonesia’s central bank to raise its rate twice by 25 basis points — in the fourth quarter of 2026 and the first quarter of 2027.