Indonesia’s benchmark stock index plunged 11.57% on Friday, October 16, its steepest one-day fall since 1998, after MSCI proposed consulting on reclassifying the country from an emerging market to a standalone market.
The sell-off came after the index provider said it no longer considered Indonesia’s emerging-market classification appropriate, though the downgrade is still a proposal, not a final decision. The Jakarta Composite Index had already fallen sharply this year, and the rupiah weakened during Friday’s trading, reaching 18,070 to the U.S. dollar, according to Reuters. MSCI cited persistent concerns about opaque shareholding structures, suspected coordinated trading and insufficient evidence that announced reforms had improved market conditions.
Those reforms include more shareholder disclosures and a roadmap to raise the minimum shareholding available for public trading, known as free float, to 15%. A move to standalone status would remove Indonesian stocks from MSCI’s emerging-market indexes, potentially prompting funds that track or benchmark against them to sell. Indonesia’s stock exchange said the consultation was not a final decision and that it would seek clarification; feedback is open until April 30, 2027, with MSCI’s decision due by June 30.
MSCI says it expects to proceed unless the consultation shows clear evidence of material improvements in market governance and functioning.