Indonesia awaits MSCI review as economist flags potential outflows
Bank Danamon’s chief economist estimates US$2 billion to US$6 billion could leave Indonesian equities if MSCI downgrades the market in the second quarter of 2027.
MSCI is scheduled to announce its November 2026 index rebalancing on 11 November Central European Time, or 12 November at 05.00 WIB, as the Indonesia Stock Exchange (BEI) prioritises improvements to market transparency, liquidity and oversight.
Bank Danamon chief economist Irman Faiz estimated that Indonesian equities could face outflows of US$2 billion to US$6 billion if MSCI changes the country’s classification from emerging market to standalone market in the second quarter of 2027. His estimate covers both passive funds that follow MSCI and actively managed funds.
Irman said those withdrawals would depend on a downgrade taking place. He also expected foreign investors to hold off increasing their share allocations during the waiting period, despite economic fundamentals remaining sound.
He argued that equity outflows would have a limited direct effect on the rupiah because investors could move proceeds into lower-risk Indonesian assets rather than take the money abroad. His study estimated rupiah depreciation of Rp11–12 for every US$100 million withdrawn from equities.
BEI trading figures showed foreign investors bought a net Rp328.20 billion of shares on 6 November. Their cumulative net sales for 2026 nevertheless stood at Rp98.08 trillion.
BEI chief executive Jeffrey said disclosures covering shareholdings above 1% now include information on affiliated parties. He said liquidity reforms had begun, but did not detail those measures or the exchange’s steps to strengthen supervision.
