Indonesia suffers a series of market sentiment setbacks in 2026

By Reuters News

JAKARTA, Oct 16 (Reuters) - Indonesia's stock market is no longer worthy of emerging market status, with concerns about market dysfunction building the case for a downgrade to "standalone" status, according to global index provider MSCI.

Following are some of the setbacks endured in 2026 by Indonesia, a $1.5 trillion economy, G20 member and global commodities powerhouse.

  • MSCI MSCI.N on October 16 said it considers Indonesia's continued classification as an emerging market no longer appropriate, adding feedback from market participants suggested a reclassification to frontier markets "would not properly recognise the depth of the market problems". Indonesia's stock exchange said it had taken concrete steps to enhance capital market transparency and integrity and would seek clarity from MSCI

  • MSCI had in January warned it could downgrade Indonesia to frontier market after flagging problems over what it said was opaque shareholding structures and coordinated trading behaviour that had undermined "proper price formation". It said market data obscured what proportion of shares in companies could be freely traded and how it categorised stock owners

  • MSCI's threat caught investors by surprise and an equities selloff of $120 billion ensued, promoting several of top Indonesian regulators to resign in January, including the bourse chief. Financial authorities promised major reforms.

  • In late January, Goldman Sachs lowered its view on Indonesian equities to "underweight" and estimated foreign investment outflows could reach $7.8 billion if an MSCI downgrade happened, though it deemed the scenario unlikely

  • Days later, rating agency Moody's cut Indonesia's credit rating outlook to negative from stable, citing reduced predictability in policymaking that could erode Indonesia's long-established policy credibility. It maintained its rating at Baa2 but said the shift to a negative reflected policy effectiveness risks and signs of weakening governance

  • Moody's also cut the outlook for several Indonesian companies, including Telkom Indonesia TLKM.JK, noodle maker Indofood CBP Sukses Makmur ICBP.JK, and heavy equipment and mining firm United Tractors UNTR.JK

  • Fitch in March followed Moody's by downgrading Indonesia's sovereign credit rating outlook from stable to negative, citing increasing uncertainty and reduced credibility in policymaking

  • MSCI cut six companies from its Indonesia index in May, after earlier concerns about ownership and trading transparency in Indonesian equities

  • MSCI had been due to conclude its Indonesia review in July but deferred that to November, saying a possible downgrade was still on the table. The review has now been extended to June 2027

  • Index provider FTSE Russell in May said it will delete Indonesian ​shares with high shareholding concentration, effective June 22. It had earlier postponed a review of Indonesia, flagging concerns similar to MSCI's about difficulty in determining levels of freely tradable, stock

  • Indonesia's central bank governor ​Perry Warjiyo quit in July, midway through his second five-year term, in a surprise move that weighed on Indonesian assets, promoting government calls for calm

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