Indonesian stock market given reprieve from downgrade threat

MSCI defers decision until November while acknowledging ​Jakarta’s reforms

A man walks past the Indonesia Stock Exchange (IDX) building in Jakarta. The index is down 30% so far this year, making it the world’s worst-performing major stock market. (Photo: Reuters)

SINGAPORE - Indonesian regulators have been given more time to carry out reforms after the index provider ‌MSCI announced a five-month extension of its review of the country’s troubled stock market.However, the reprieve will not immediately lure long-term capital back to the battered market, investors said on Wednesday.

The benchmark index fell 1.6% after MSCI pushed its review to November, deferring rather than eliminating the threat to downgrade Indonesia from an emerging market to a “frontier market”.

A downgrade could trigger as much as $13 billion in outflows from Indonesian equities, the US investment bank Goldman Sachs has estimated, at a time when the Jakarta market capitalisation has already shrunk to $600 billion from above $900 billion in January.