nalysts say Friday’s stock market rout was driven by panic-selling and investors’ risk-off response to MSCI’s proposal to reclassify Indonesian equities in its global indexes, even though a final decision will not happen until the end of June 2027.
Nafan Aji Gusta, senior technical analyst at Mirae Asset Sekuritas told The Jakarta Post on Sunday that the downgrade risk could intensify sell-off pressure and market volatility due to a potential decline in foreign capital allocations, particularly from passive funds benchmarking to the MSCI index.
He added that the sharp correction also reflected “trust issues” among investors over transparency, liquidity and governance credibility in the capital market.
The Indonesia Stock Exchange (IDX) suffered a massive foreign sell-off as investors were spooked by MSCI’s proposal to categorize Indonesia as a “standalone market”.
Stock market records show net foreign sell orders of Rp 3.34 trillion (US$185.2 million) on Friday, pushing the cumulative foreign outflows since the start of the year to a historical high of Rp 88.19 trillion.
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Friday’s net foreign sell surpassed the worst levels seen during the coronavirus pandemic in 2020 and the 2008 global financial crisis, which stood at Rp 53.84 trillion and Rp 50.17 trillion for the full calendar year, respectively.