Jakarta. Indonesian stocks plunged 8.01% to 5,393 on Friday, shedding 469 points after global index provider MSCI announced a consultation on reclassifying Indonesia from an emerging market to a standalone market. Trading was halted for nearly two minutes following the sharp sell-off.

Jakarta Composite Index (JCI) had closed at 5,863 on Thursday, down 1.33%.

The proposed reclassification threatens to trigger foreign capital outflows as Indonesian stocks could be removed from MSCI's emerging market indexes if the change proceeds.

Mirae Asset Sekuritas analyst Wilbert Arifin warned that large-cap stocks and companies with high foreign ownership would be particularly vulnerable. He estimated that the potential outflow of passive foreign funds could reach US$ 3 billion if MSCI implements the reclassification.

MSCI announced the consultation on Oct. 15, New York time, citing concerns over the transparency of share ownership structures and alleged coordinated trading practices that could undermine the investability of Indonesia's stock market.

MSCI has also maintained a freeze on certain changes related to Indonesian stocks in its indexes until further notice while the consultation proceeds, Wilbert wrote in a research note on Friday.

The measures heighten the risk of foreign selling and could add further pressure on the JCI, he said.

“Major banking stocks and companies with high foreign ownership need to be watched closely, as they could be affected if global investors adjust their portfolios in response to a change in classification,” Wilbert added.

However, MSCI has not made a final decision on Indonesia's status. The index provider is accepting feedback from market participants until April 30, 2027, and is scheduled to announce its final decision no later than June 30, 2027.

Amid the uncertainty, Wilbert advised investors to reassess their exposure to large-cap stocks with high foreign ownership. Investors could also consider companies with a larger domestic investor base and relatively lower exposure to index-driven fund outflows.

He stressed that a downgrade was not yet final and that the outcome would depend on tangible improvements in capital market supervision and law enforcement.

Separately, Indonesia's external debt rose to $459.3 billion in August 2026, up 5.6% year-on-year from $454.8 billion in July.

The increase was driven by higher public external debt owed by the government and the central bank, which more than offset a decline in private external debt.

External debt stood at 30.9% of gross domestic product (GDP) in August, with long-term debt accounting for the largest share. While rising debt could increase the government's interest and principal repayment obligations, the dominance of long-term borrowing provides greater repayment flexibility and limits near-term refinancing pressure.

Global sentiment also remained defensive amid growing concerns over the sustainability of artificial intelligence investment and whether technology infrastructure companies could generate returns commensurate with their substantial capital spending, Kiwoom Sekuritas Indonesia said.

On Wall Street, US stocks closed mixed on Thursday. The S&P 500 gained 0.3%, the Nasdaq Composite was relatively flat, and the Dow Jones Industrial Average rose 557 points.

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