Key takeaways
The sell-off was driven by Indonesia, not global markets. MSCI’s proposal to move Indonesia out of Emerging Markets forced foreign funds to sell, and the IHSG fell 16.70% in October. Rupiah bonds fell even as US yields dropped.
Your portfolio fell less than the market, but more than it would have. AMP Ultra Growth fell 10.52% against the IHSG’s 16.70%. We had added equity before the news, and that cost returns. The Dollar Bond Fund gained 0.52% as the rupiah weakened.
We’ve halved equity in AMP until the forced selling eases. Indonesian valuations are still attractive, but cheap prices offer little protection while index funds have no choice but to sell. Ultra Growth moves from 70% to 35% equity.
Why MSCI’s proposal hit Indonesian stocks and bonds
Going into October, we were adding equity and named the Fed’s late-October meeting as the main risk. The Fed held rates. The damage came from elsewhere.
On 15 October, MSCI proposed moving Indonesia from Emerging Markets to Standalone status. Global funds that track the Emerging Markets index would then have to sell their Indonesian holdings, whatever the price. Foreign investors sold Rp 16.9 trillion of Indonesian stocks in October. The IHSG had its worst day since 1998 and ended the month down 16.70%.
Rupiah bonds sold off too. The 10-year yield rose to 7.72%, its highest close this year, and the rupiah weakened to 18,127 per US dollar. US Treasury yields fell over the same period. That contrast tells us investors were pulling back from Indonesia specifically, not reacting to global rates.
How your AMP portfolio did
AMP Risk Levels 2 to 5 returned between -3.12% and -10.52%, each less than the IHSG’s 16.70% fall. They still fell more than usual because we had raised equity before the MSCI news. Risk Level 1 returned -0.58%, cushioned by its cash weight.
The Dollar Bond Fund returned +0.52%, against -1.64% for the rupiah-based Simpan Bond Fund. Holding dollar assets protected investors from the rupiah’s weakness.
Why we halved equity in AMP for November
In AMP, we halved equity across Risk Levels 2 to 5, moving the difference into our Cash and Fixed Income Funds. AMP Ultra Growth, for example, goes from 70% to 35% equity. Risk Level 1 moves fully into cash until bond yields stabilise.
In the Simpan Sustainable Equity Fund, we exited conglomerates where rumours were driving sharp swings. We added to Bank Mandiri, BNI and Bukit Asam, where the sell-off pushed dividend yields to attractive levels or results remain solid.
In fixed income, we’re keeping duration short, which makes our bond funds less sensitive to further rises in yields.
Do we still believe in Indonesia’s market?
Yes, in the long run. Valuations are attractive, and regulators are acting on what MSCI asked for. But faith in a market and exposure to it are two different decisions. While index funds may still be forced to sell, attractive valuations offer little short-term protection. Reducing equity now protects your capital and leaves cash ready to add back once the selling eases.
What would make us add equity back
The main risk is a quick recovery, which our lower equity weight would partly miss. We’re watching the MSCI review on 11 November, the next government bond auction, Bank Indonesia’s meeting on 17 and 18 November, and the rupiah.
Do I need to do anything?
If you hold AMP, no. It rebalances automatically. If you hold individual Simpan funds, it’s a good moment to check your mix still fits your risk profile.
Past performance is not a guide to future returns. The value of investments can go down as well as up.