What does it mean for Indonesia?
Indonesia’s weight in the MSCI Emerging Markets index fell from 1.16 per cent at the end of 2025 to 0.43 per cent by September 30, and its constituents fell from 18 to 9, as MSCI froze additions and deleted names flagged under Jakarta’s own concentrated-holding framework, Harshal Dasani, business head at INVasset PMS, said. At 0.43 per cent, he said, that forced passive selling runs to a few billion dollars, which is less than the market lost in Friday’s session. For the year, the index is down 39 per cent, making it one of the worst-performing emerging markets this year. Justin Khoo of VT Markets said that forced selling by index-tracking funds, potentially accelerating foreign outflows, weakening the rupiah, and tightening domestic financial conditions are the immediate concerns for the market. “An 11% plunge alone is unlikely to destabilize Indonesia’s financial system. However, with the country’s stock market already down nearly 40% this year, sustained foreign capital outflows could weaken market liquidity, discourage investment and further erode investor confidence,” he added. Standalone status, according to Dasani, is the index equivalent of delisting from global portfolios. This would make foreign ownership a discretionary hedge-fund decision rather than an allocation, and the cost of equity rises for years. He observed that Argentina went standalone in 2021 over capital controls and is still there.
Limited global spillover
Despite being Southeast Asia’s largest economy, Indonesia is a small part of the MSCI Emerging Markets Index, suggesting limited direct global spillover. Other ASEAN markets may benefit from portfolio reallocations, although broader regional sentiment remains vulnerable, he noted. Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.
