Indonesia’s stock market suffered its worst day in nearly three decades on Friday, October 16, after index provider MSCI said it would put the country on a path to “standalone market” status. The benchmark fell as much as 11.4% to its lowest level since early November 2020, the steepest one-day drop since January 1998, The Star reported.
What MSCI proposed
Standalone status sits below MSCI’s frontier category. It would remove Indonesian stocks from a range of global indexes, forcing passive funds that track them to sell. Indonesia would join Argentina, Lebanon, Palestine and Ukraine in that group, and would be the only Asia-Pacific market in it.
How the market reacted
- The index opened 8% lower, triggering a 30-minute trading halt.
- Bank Central Asia, Bank Rakyat Indonesia and Bank Mandiri each fell nearly 15%.
- Jakarta stocks are down nearly 40% this year.
- The rupiah weakened to 18,070 per dollar, close to its lifetime low of 18,190.
What Indonesia needs to show
Josua Pardede, chief economist at Bank Permata, said Indonesia must demonstrate measurable improvements in market transparency and regulatory enforcement. The country’s financial regulator has pledged improvements following the warning.
Lessons for other emerging markets
Index classification can move billions of dollars. Pakistan itself was reclassified from MSCI Emerging Markets to Frontier Markets in 2021, and investors watch market access, liquidity and free float closely. The Pakistan Stock Exchange has had a volatile year amid the oil shock. See our Markets analysis.
More from the region in our Asia section.
Sources are linked throughout this article. AajMirror verifies figures against the original reports; if you spot an error, see our corrections policy.
