Jakarta. Indonesian stocks plunged below the psychological 5,000 level on Monday, falling 4.31% to 4,961 as MSCI’s proposed downgrade of the country’s market classification and global oil prices topping $110 per barrel intensified selling pressure.

The Jakarta Composite Index fell as much as 224 points, with the index subsequently ranging between 4,946 and 4,974. In early trading, 2.12 billion shares changed hands, with turnover reaching Rp 2.7 trillion ($149.62 million) across 125,266 transactions. Only 62 stocks advanced, while 638 declined and 69 were unchanged.

Phintraco Sekuritas said concerns over MSCI’s proposed reclassification of Indonesia’s stock market were likely to continue weighing on the index this week, alongside rising global uncertainty driven by geopolitical tensions and surging oil prices.

Although MSCI’s proposal to downgrade Indonesia from Emerging Market to Standalone Market status remains under review and has not been finalized, the issue has already heightened uncertainty in the domestic capital market, Phintraco Sekuritas said. The brokerage expects MSCI-related concerns to remain the dominant negative catalyst for Indonesian stocks this week.

The uncertainty has made investors more risk-averse. Meanwhile, efforts by market authorities to enforce regulations against parties suspected of violations could increase volatility and undermine investor confidence in the short term. However, effective enforcement could strengthen the market’s credibility and restore investor confidence over the longer term, the brokerage added.

Beyond Indonesian equities, Pluang Research said MSCI-related concerns surrounding Strategy, a company that has accumulated substantial Bitcoin holdings, should be distinguished from Bitcoin’s underlying fundamentals. Strategy has financed its Bitcoin purchases through share and debt issuance, exposing investors to risks including share dilution and debt obligations.

Pluang Research said uncertainty over Strategy’s potential index reclassification could spill over into the cryptocurrency market, particularly if investors expect the company to slow its Bitcoin purchases ahead of new rules taking effect on Nov. 30. However, Pluang said that the pressure stems from the company’s financing structure rather than a deterioration in Bitcoin’s fundamentals. Pluang Research maintains a Bitcoin price target of $100,000.

Global market weakness has compounded the pressure. Wall Street closed lower on Friday, led by a 2.15% plunge in the Nasdaq Composite. The S&P 500 fell 1.09%, while the Dow Jones Industrial Average lost 175 points. Selling in semiconductor stocks extended into an eighth consecutive session, marking the sector’s longest losing streak since the 2008 global financial crisis.

“The VIX volatility index rose above 22 for the first time in four months, reflecting growing investor anxiety and uncertainty over the market outlook for the next 30 days,” Phintraco Sekuritas said.

Brent crude prices also surged more than 3% to above $110 per barrel amid escalating conflict in the Middle East and the Russia-Ukraine war, adding to concerns over the global economic outlook.

Meanwhile, Federal Reserve Chairman Kevin Warsh gave no indication of the outcome of this month’s Federal Open Market Committee (FOMC) meeting. However, he said higher-than-expected inflation had not changed his assessment of the US economy.

The developments have reduced expectations of a Fed rate hike this month, although global investors will continue to monitor geopolitical tensions, oil price movements and inflation trends.

“Investors should continue to monitor developments surrounding MSCI and the Jakarta Composite Index’s movement around the psychological 5,000 level this week to anticipate potential increases in trading volatility,” Phintraco Sekuritas said.

Across regional markets, Japan’s Nikkei fell 1.18% as of 9:41 a.m. Jakarta time, while South Korea’s Kospi slipped 0.40% and Shanghai’s SSE declined 0.28%. Hong Kong’s stock market was closed for a public holiday.

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