Jakarta’s benchmark fell more than 5% again on Monday, CNBC reported, a week after Friday’s 11.57% collapse. The headline figure attached to this story is the forced selling from index funds. We think that is the smaller number, and the larger one is the one Jakarta can still do something about.
Our arithmetic: Friday’s close of 5,185.11 plus Monday’s drop of more than 5% puts the index below roughly 4,930, a loss of about 16% in two sessions. The UBS estimate that Reuters carried puts passive outflows at about $4 billion, with active investors adding a further $15 billion. Active money is 3.75 times the passive money, and nobody forces it to leave.
What MSCI Said, and What It Cost
On Friday MSCI said that Indonesia’s continued classification as an emerging market was “no longer appropriate” and opened a consultation on moving it to standalone status, a group that would bypass frontier markets entirely. It cited “continued suspected coordinated trading behavior and lack of evidence of meaningful enforcement,” and said it expects to proceed unless the consultation shows clear improvement. The final decision comes by the end of June 2027, about eight months away.
The market did not wait. IDN Financials logged a 678.68-point fall in the Jakarta Composite Index, with 812 stocks down and 11 up, after a 30-minute halt at the open. The index is down 39% for the year and sits at its lowest since November 2020.
The Estimates Disagree, and the Biggest Part Gets Less Attention
| Estimate | Passive outflow | Active outflow |
|---|---|---|
| UBS, via Reuters | about $4 billion | about $15 billion |
| Goldman Sachs, via Bloomberg Television | $5.6 billion | not given |
Bloomberg Television said on Monday: “Goldman Sachs estimates $5.6 billion could vanish overnight if MSCI acts on their warning.” Passive funds must sell. Active managers choose to, and they choose based on whether they believe Jakarta’s reforms are real. Reuters noted that foreign investors had already net sold $4.7 billion of Indonesian stocks this year, so the UBS passive figure is about 85% of everything foreigners have sold all year, and the active figure is more than three times it.
The Blue Chips Went First
The damage was not concentrated where MSCI’s complaint points. IDN Financials reported that Bank Central Asia fell 14.81%, shaving 82.27 points off the index, and Bank Rakyat Indonesia fell 14.84%, taking off 68 points. Those two banks account for 150.27 of the 678.68 points, or 22%. Neither bank is among the three companies the regulator sanctioned for trading manipulation that day, so by our read the selling was indiscriminate. A selloff that hits the biggest banks hardest is a liquidity event as much as a governance verdict, and those tend to overshoot.
What Jakarta Has Left to Show
Officials are meeting MSCI, the exchange wants higher fines, and companies are announcing buybacks, as Bloomberg Television described:
“The exchange is meeting with MSCI and looking to increase fines on misbehaving companies while corporations are stepping up with stock buybacks. Yet these incremental measures are failing to calm the market.”
We agree with the second sentence. Buybacks support prices and do nothing for a rule that is not enforced. MSCI’s own wording points at enforcement, and the Financial Services Authority sanctioned three listed companies for trading manipulation on Friday, which is the right kind of action but a handful of cases. A credible answer is a visible run of penalties against large, well-known names before the November index review. That is what could win back the $15 billion that can leave, and complaints that MSCI never raised standalone status at this week’s Bangkok meeting will not.
Watch the November review and the first interim update from MSCI. If neither shows enforcement, the June verdict is already written.