SINGAPORE: Goldman Sachs lowered its rating on Indonesian equities on Thursday, a day after index provider MSCI flagged investability risks, predicting passive selling to continue, and the worries to remain an overhang on the market.
"We expect further passive selling and regard this development as an overhang that will impede market performance," analysts at Goldman Sachs said of the MSCI's move as the brokerage lowered its rating on the Jakarta Composite Index to "Underweight".
The benchmark index slumped 7.35% on Wednesday after the MSCI statement, posting its biggest one-day drop since April 2025.
MSCI warned the market risked a downgrade to frontier status if it failed to resolve the issues and froze updates to Indonesian securities in its products to mitigate what it called "investability risks."
Goldman Sachs strategists anticipate potential passive outflows from Indonesian equities could range from $2.2 billion to $7.8 billion in the wake of the MSCI assessment, they said in a separate research note.
Overseas investors sold 13.96 trillion rupiah ($834 million) worth of Indonesian shares in 2025, the worst year of outflow since 2020, with the sell-off continuing in January, data compiled by LSEG showed.
The Indonesian government is expected to hold a meeting soon regarding the MSCI matter, senior economic minister Airlangga Hartarto said on Wednesday. - Reuters
