Indonesia stocks log steepest fall in 28 years after MSCI downgrade warning

Indonesia's stock market plunged today in its steepest drop in 28 years after MSCI warned it could downgrade the country, Nikkei Asia reports. The signal from the influential index provider jolted investors who track MSCI benchmarks, heightening fears of forced outflows and tighter liquidity, according to Nikkei Asia. Because MSCI indices guide large passive and active allocations, any downgrade risk can quickly translate into selling pressure across local equities.

Nikkei Asia said the slump followed MSCI's caution on Indonesia's status, prompting funds to reassess exposure. Traders are watching for clarifications from MSCI on scope and timing of any action, and for responses from Jakarta officials and the stock exchange. Key next steps include whether MSCI opens a formal review and how policymakers signal support for market stability. [Developing. This article will be updated.]