Makassar. President Prabowo Subianto said Wednesday that MSCI’s plan to downgrade Indonesia's status would not make Jakarta tremble with fright despite a recent stock market crash.

MSCI is weighing ejecting Indonesia from the “emerging” status and into the “standalone” status, which could cause multi-billion-dollar capital outflows. The Jakarta Composite Index (JCI) had fallen sharply following its surprise announcement on Friday. While market authorities plan to seek further clarification, Prabowo made a highly anticipated comment on MSCI’s threat in a cabinet meeting marked two years of being in office.

“Our country continues to face all sorts of disturbances, including the MSCI. They are trying to scare us,” Prabowo told his ministers in a live-broadcast speech.

“Let me tell this to MSCI: Our nation fears no one and will not be intimidated. We have the power and courage. We are willing to make sacrifices. We will never give up,” Prabowo said.

He ended his speech by floating plans for “large-scale austerity measures”, without going into the specifics. His administration has been aggressively cutting non-essential state spending to channel the money into flagship programs. The stream was cut off as Prabowo sought to brief his cabinet members behind closed doors, although economic policies are expected to be high on the agenda. 

MSCI currently puts Indonesia in the “emerging” market group, which reflects significant openness to foreign ownership and greater liquidity. Opaque shareholding structures and coordinated trading behavior had prompted the American finance company to consider kicking Indonesia out of the group. 

At first, they were mulling moving Jakarta to the “frontier” status, which groups markets that have fewer investment opportunities. This announcement alone had also caused a market rout back in January.

Indonesia had been pursuing market reforms to stave off the concerns, among others, by disclosing the names of shareholders with at least 1% ownership. MSCI recently decided a double downgrade to the “standalone” group would be a more fitting threat. They will make the final decision by the end of June, but if the move does take place, Indonesia will risk having its stocks excluded from indexes tracked by global funds.

The MSCI fears sent the JCI to its lowest since the pandemic on Monday, although stocks had rebounded by rising 0.94% on Wednesday’s close.

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