Indonesia’s benchmark stock index plunged over 5% on Monday to its lowest level in six years, as concerns over a potential MSCI downgrade intensified fears of further foreign investor outflows. MSCI proposed reclassifying Indonesia directly from an emerging market to stand-alone status, with a final decision expected in June. Goldman Sachs estimated that a full removal from MSCI’s emerging-market indexes could trigger approximately $5.6 billion in passive fund outflows, with an additional $2.7 billion at risk if FTSE Russell subsequently takes similar action. Foreign investors have withdrawn a net $5.1 billion from Indonesian equities this year, with foreign ownership declining to 25% in October from 27% in January and the value of foreign holdings nearly halved to approximately $130 billion from $250 billion. Goldman’s strategists said Indonesian equities may not have bottomed yet.
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