Indonesian Stocks Dive as MSCI Weighs Downgrade to Standalone Market

By Amanda Lee and Ying Xian Wong

Indonesian stocks suffered their biggest drop since the 2008 global financial crisis after index provider MSCI said the country risked being removed from its indexes, reigniting fears about the investability of the Southeast Asian economy.

The Jakarta Composite Index plunged more than 10% on Friday, on track for its biggest daily percentage drop in 18 years. The benchmark index had opened 8% lower, triggering a temporary halt.

The selloff pushed the JCI's losses this year to nearly 40%, making it the worst-performing Asian stock market. The rupiah weakened to around 18,045 against the dollar.

MSCI on Thursday launched a consultation on a potential reclassification of Indonesia from emerging-market to standalone status, which would remove the country's equities from its main indexes. Indonesia would be the first Asia-Pacific market to have a standalone status if the proposed downgrade takes place.

The latest move marks an escalation from January, when MSCI warned it could downgrade the country to frontier-market status, citing investability and transparency concerns.

Under scrutiny by global index providers and credit rating agencies, Indonesian authorities have announced reforms and sought to address market concerns. MSCI in its statement said investors' feedback suggests a frontier-market reclassification won't properly recognize the depth of the market problems.

"Market participants have indicated to MSCI that, to date, sufficient progress has not been observed consistently across the Indonesian equity market," MSCI said. "Significant concerns remain around market dysfunction, including continued suspected coordinated trading behavior and lack of evidence of meaningful enforcement."

The index provider is taking feedback through April 2027 and will announce its decision by the end of June.

Write to Amanda Lee at amanda.lee@wsj.com and Ying Xian Wong at yingxian.wong@wsj.com

(END) Dow Jones Newswires

October 16, 2026 00:42 ET (04:42 GMT)