Jakarta. Indonesian stocks suffered a massive sell-off on Friday, losing 678 points or 11.57% to close at 5,185, their lowest level this year, after MSCI warned it could reclassify Indonesia from an Emerging Market to a Standalone Market.

Jakarta Composite Index (JCI) traded in negative territory throughout the session, moving between 5,185 and 5,404. The benchmark had started 2026 on a strong footing, hitting a record high of 9,134 on Jan. 20 before entering a prolonged correction.

Trading volume reached 68.57 billion shares, with turnover of Rp 31.95 trillion ($1.77 billion) across more than 2.1 million transactions. Only 10 stocks advanced, while 775 declined and 10 remained unchanged.

Pilarmas Investindo Sekuritas said MSCI's warning had drawn significant attention from market participants because a reclassification could lead to Indonesian stocks being excluded from major MSCI indexes used by global investors as investment benchmarks.

“Investors' concerns mainly relate to ownership transparency, free-float measurement and allegations of coordinated trading practices,” Pilarmas wrote in its research note on Friday.

However, the brokerage said Indonesia's status change was not yet final. MSCI is scheduled to announce the outcome of its evaluation and any reclassification decision by the end of June 2027.

Chief of Economic Affairs Minister Airlangga Hartarto attributed Friday's market turmoil, including the trading halt and the rupiah's slide to around Rp 18,000 per US dollar, to MSCI's plan to reconsider Indonesia's market classification.

“First, this was certainly triggered by MSCI's announcement, but the announcement came earlier than expected. They had actually promised to make it in November, but it came in October,” Airlangga told reporters at the Coordinating Economic Affairs Ministry on Friday.

Airlangga said MSCI had given Indonesia a window between April and June 2026 to address concerns about its capital market. He stressed that regulatory reforms must be implemented consistently, a process that requires time.

“However, this is a lesson for us going forward: reforms must be implemented, and their progress must be visible, particularly to domestic and foreign investors,” Airlangga said.

“On other technical matters, we will discuss them with the stock exchange and expect concrete measures to be accompanied by a clear timeline,” he added.

Fakhrul Fulvian, chief economist at Trimegah Sekuritas Indonesia, said MSCI's consultation on a potential reclassification raised questions that extended beyond the benchmark's daily performance.

“This is not simply a matter of the JCI falling. When MSCI begins questioning whether Indonesia still deserves to be classified as an Emerging Market, what is being tested is confidence in our market institutions,” Fakhrul said.

He said MSCI's concerns had not emerged suddenly. Since early 2026, MSCI has flagged opacity in share ownership structures, insufficient information to accurately assess free float and concerns about potential coordinated trading behavior that could undermine proper price formation.

“Therefore, in my view, this is no longer just a free-float problem. It has become a problem of trust,” Fakhrul added.

Beyond domestic market concerns, Pilarmas said stronger-than-expected US economic data had increased expectations of further interest-rate hikes. Nevertheless, market participants saw a roughly 72% probability that the Fed would keep rates unchanged at its meeting this month.

The October 2026 edition of the Fed's Beige Book offered a mixed picture of the US economy, reporting moderate growth across most Federal Reserve districts despite persistently high interest rates.

Meanwhile, elevated oil prices added to concerns about inflation and the possibility of tighter monetary policy. Investors were also awaiting China's economic data, including gross domestic product growth figures, scheduled for release next week.

The sharp decline in Indonesian stocks contrasted with gains across most Asian markets, which rebounded after Wall Street ended its previous session higher. Easing selling pressure on technology stocks helped support global sentiment following the previous day's sell-off.

South Korea's benchmark Kospi rose 2.1% to 5,668 after tumbling 7.6% a day earlier as AI-related stocks came under pressure. Japan's Nikkei gained 1.4%. Hong Kong's Hang Seng Index advanced 0.4%, while the Shanghai Composite edged up 0.2%.

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