Our assessment of Indonesia’s equity market proved too constructive.
In our market updates last month and earlier this month, we said that the bulk of the negative developments had cleared. This view was reflected in our decision to increase equity exposure. We anticipated further scrutiny from MSCI, but not an escalation to a potential reclassification of Indonesia from Emerging Market to Standalone Market status. This caught much of the market off guard, including us.
What happened?
On 15 October 2026, MSCI opened a consultation on reclassifying Indonesia, stating that its continued classification as an Emerging Market was “no longer appropriate.” The following morning, the IHSG fell 8.01% at the open, triggering a trading halt, before losses widened to as much as 11% intraday.
MSCI’s concerns center on ownership transparency, concentrated shareholdings, and the reliability of free-float data. While Indonesian regulators have introduced reforms over the past nine months, MSCI believes measurable improvements in market accessibility and investability have yet to be demonstrated.
Why does it matter?
A reclassification to Standalone Market status would remove Indonesia from MSCI’s Emerging Markets indexes. Funds tracking these indexes could be required to sell their Indonesian equity holdings, potentially adding further pressure to the market.
However, this is not a final decision. The consultation remains open until 30 April 2027, with a final decision expected by 30 June 2027.
How do we view the market now?
We are staying patient. Forced selling can push share prices below what company fundamentals justify, and we believe Indonesia still has time to address MSCI’s concerns before a final decision is made.
For our clients, this is where a resilient, well-diversified portfolio matters. AMP is designed to help clients navigate changing market conditions through managed asset allocation. Alongside this, maintaining diversification into dollar-denominated assets can help reduce reliance on a single market.
Uncertainty remains, and further volatility is possible. Our focus is to stay disciplined, manage risk, and look for long-term opportunities as the situation develops.
Thank you and we will keep you informed.