Indonesian stocks fell 7.9% on Wednesday after index provider MSCI flagged investability risks and said it would apply an interim freeze on certain index-related changes, adding pressure to a market already weighed down by persistent outflows.
The Jakarta Composite Index marked its biggest one-day slide in 10 months, hitting the lowest level since last November.
MSCI, whose indexes often serve as key benchmarks for global investors, said it would freeze Indonesian stocks from entering or growing in its indexes until regulators address some of investor concerns around hidden ownership structures and possible coordinated trading that distorts prices.
The Indonesian Stock Exchange (IDX), financial regulator OJK, and the Securities Depository and Settlement Institution (KSEI) were in discussions with MSCI to address data transparency issues, the exchange operator told Reuters.
MSCI's actions come as Southeast Asia's largest economy faces persistent foreign outflows, weighing on its capital markets and currency, with investors seeking returns elsewhere.
Overseas investors sold 13.96 trillion rupiah ($834.43 million) worth of Indonesian stocks in 2025, the worst year of outflows since 2020, with the sell-off continuing in January, according to LSEG-compiled data.
"We believe this could put Indonesia under negative sentiment if MSCI decides to reduce Indonesia's weighting in the MSCI Emerging Markets (EM) index. However, we think downside risk will likely be limited due to persistent foreign outflows since 2025," William Simadiputra, Head of Research Indonesia at DBS Group, said.
The Indonesian rupiah rose 0.3%, in line with other regional currencies, as the dollar struggled near four-year lows after U.S.
President Donald Trump brushed off recent weakness in the greenback, exacerbating the dollar selling.
The MSCI index of emerging market currencies rose 0.5% to an all-time high in its fifth consecutive session of gains.
The Malayian ringgit appreciated 0.9% to its highest point since May 2018, and the South Korean won rose 0.5%.
Meanwhile, the baht pared gains to trade at 31 per dollar after the central bank governor said Thailand will set a cap on daily gold trading to curb the overvalued currency's strength.
A strengthening baht threatens Thailand's export-dependent economy, which has also been pressured by global trade tensions and domestic problems at hand.
On the equities front, South Korean stocks scaled a record high after Trump said that the U.S. and South Korea will work out a solution following his threat of a tariff hike. Taiwan stocks climbed 1.2% to a record high.
HIGHLIGHTS:
** U.S. Federal Reserve Federal Reserve meets to set rates later on Wednesday, no policy change expected
** China gives green light to importing first batch of Nvidia's H200 AI chips, sources say
** US calls Taiwan 'vital partner' after high-level tech and AI talks - Reuters
