EMERGING MARKETS-Indonesian stocks tumble to 6-year low on MSCI downgrade fears

By Sneha Kumar

Oct 19 (Reuters) - Indonesian equities slumped more than 5% to a 6-year low on Monday as rattled investors exited stocks after MSCI warned last week that the country could be removed from a suite of indexes tracked by global funds.

Malaysia's benchmark stock index .KLSE slipped nearly 1% to its weakest level in more than a month, following a 0.9% loss in the previous session.

Official advance estimates released on Friday showed the economy grew 5.3% in the third quarter, easing from 6.0% growth in the previous quarter.

Seoul's stock market .KS11 opened 3.2% lower before reversing course to gain 0.6%.

Singapore stocks .STI also reversed course to rise 0.4%, while the Philippine benchmark index .PSI jumped as much as 0.8% to a three-week high.

Equities in Taipei .TWII fell as much as 2% to their lowest level since mid-September as concerns grew over whether lofty AI-related valuations can withstand rising financing costs.

Among currencies, the Taiwan dollar posted the biggest decline in the region, falling 0.7% to its weakest level since April last year. The currency has lost about 2% so far this month, its steepest monthly drop since March.

Taiwan's central bank attributed the recent depreciation to the "turmoil" in global stock markets, with foreign investors net selling domestic stocks and repatriating funds, including dividends.

The South Korean won appreciated to 1,331.64 a dollar, while the Indian rupee extended its winning streak to a sixth session, rising to 94.7950.

INVESTORS HIT PANIC BUTTON IN INDONESIA

The Jakarta Composite Index .JKSE dropped 5.4% to its lowest level since October 2020, extending a nearly 12% plunge on Friday in its worst single-day decline in decades.

It is the world's worst-performing major equity index this year, down more than 40%.

In a surprise move on Friday, MSCI said it would place Indonesia on a path to "standalone market" status, a steeper downgrade than the previously flagged "frontier market" classification.

Such a move would exclude Indonesian stocks from indexes tracked by global funds and could trigger billions of dollars in capital outflows.

Ahead of Bank Indonesia's policy meeting later this week, the rupiah weakened to 18,040 per dollar. Further depreciation could force policymakers to raise interest rates.

The Indonesian central bank is likely to raise its policy rate by 25 basis points to 6.00% following the recent depreciation in the rupiah, said Si Ying Toh, an Asia economist at Nomura.

"BI will likely continue to emphasize the use of other tools such as hedging incentives and FX interventions to support the currency."

Bank of Korea and the Philippines' central bank are also scheduled to meet in the second half of this week, with the former anticipated to hold steady and the latter to tighten policy settings further.

HIGHLIGHTS:

** Malaysia's September CPI rises 1.8% y/y, slower than forecast

** Indonesia stock market leaders to meet MSCI on Monday, official says

** China's third-quarter economy picks up pace as exports power uneven recovery