Indonesia stocks post largest drop in 28 years after MSCI downgrade warning

Indonesia’s stock market posted its steepest one-day drop in 28 years today after MSCI warned of a potential downgrade, Nikkei Asia reports. The signal from the index giant matters because a downgrade can force passive funds to cut exposure, risking outflows from Southeast Asia’s largest economy. It also raises questions about market accessibility and policy credibility at a time when Jakarta is courting foreign investment to support growth.

Nikkei Asia said the warning triggered a broad sell-off across the Jakarta market, with investors rushing to reduce risk ahead of any reclassification decision. MSCI’s market status reviews influence how trillions of dollars are allocated, and even a small weight change can unsettle liquidity and valuations. Traders are watching for statements from Indonesian authorities and any clarification from MSCI on the review timeline. [Developing. This article will be updated.]