Jakarta. Indonesia’s benchmark Jakarta Composite Index (JCI) remained under heavy pressure on Wednesday as investors reacted to negative sentiment tied to Morgan Stanley Capital International (MSCI) and broader global concerns. 

The JCI at one point slid as much as 6.8% to 8,369.4 in morning trade, stopping short of triggering a trading halt, which applies at an 8% decline. At the close of the first trading session, the JCI had fallen 659 points, or 7.34%, to 8,321.

According to Liza Camelia Suryanata, head of equity research at Kiwoom Sekuritas Indonesia, the market impact from the latest developments could last for around a week. She said the situation was structurally discouraging, although not necessarily enough to derail the JCI’s longer-term uptrend. With MSCI having announced the outcome of its review on Indonesia’s free-float assessment methodology and amid expectations of foreign portfolio rotation by passive funds, she noted that elevated volatility this week was to be expected.

Kiwoom Research highlighted that MSCI has closed its public consultation on assessing the free float of Indonesian stocks. While some global investors accepted the use of Monthly Holding Composition Report data from KSEI as a supplementary reference, most viewed the classification of shareholders as still insufficiently reliable.

Minor improvements in free-float data from the Indonesia Stock Exchange were seen as failing to address core investability issues, including limited transparency in ownership structures, risks of ownership concentration, and the potential for coordinated transactions that could distort price discovery.

MSCI has indicated that more granular and verifiable ownership data are needed, including better monitoring of concentrated holdings, to strengthen its free-float assessments. As an interim measure, MSCI has imposed an immediate freeze on changes to Indonesian equity indexes, covering both index reviews, including the February 2026 review, and corporate actions.

This policy effectively halts any increases in foreign inclusion factors and the number of shares, bars the addition of Indonesian stocks to MSCI Investable Market Indexes, and prevents upgrades in size segments, such as moves from small-cap to standard indexes. The step is aimed at reducing index turnover risk while allowing time for improvements in market transparency.

MSCI has also warned that if there is no meaningful progress in transparency by May 2026, it will reassess Indonesia’s market accessibility. Options under further consultation could include a reduction in Indonesia’s weighting in the MSCI Emerging Markets index or even a reclassification from emerging market to frontier market status. Any such decision, MSCI said, would follow continued dialogue with regulators and market participants, including the Financial Services Authority and the stock exchange.

These developments have been widely seen as negative for Indonesian equities, as they remove near-term upside potential from MSCI-related index changes. Market attention is now shifting to regulatory responses, with credible improvements in transparency viewed as critical to restoring confidence.

Liza added that short-term volatility was likely to remain high, with additional attention on the outcome of the US Federal Reserve’s two-day policy meeting.

The Fed is widely expected to keep interest rates unchanged amid still-sticky inflation and signs of moderation in the labor market. She said the combination of domestic and global factors would keep markets on edge this week, even as some investors may begin looking for opportunities to buy on weakness.

Global sentiment was also influenced by comments from US President Donald Trump, who said he would soon announce a new nominee for Federal Reserve chair and claimed interest rates would fall significantly once new leadership takes office. His remarks have intensified market concerns over the central bank’s independence and contributed to pressure on the US dollar, adding another layer of uncertainty for global and regional markets.

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