MSCI adjustment imminent, Indonesian stock market sees first foreign capital outflow in 16 weeks

Glonghui, January 26｜Due to the upcoming adjustment of its index compilation methodology by MSCI, and a cooling in market risk appetite, the Indonesian stock market recorded its first capital outflow since October last year. According to data compiled by institutions, overseas investors sold local stocks worth $192 million last week, marking the first outflow in 16 weeks. This withdrawal occurred after Indonesia's benchmark stock index hit a record high on January 20. “Last week’s foreign sell-off was partly due to reducing holdings ahead of MSCI’s announcement regarding free float shares, and partly for profit-taking,” said Aletheia Capital analyst Neelgunan Tiruchelvam. “Even some local funds have already pulled out.” In a report on Friday, Goldman Sachs strategists including Alvin So wrote that MSCI’s recalculation of Indonesia’s free float shares could lead to passive funds withdrawing about $2.3 billion from the Indonesian stock market in the coming months.