Economy: Jakarta Stock Exchange collapses 11% after threat of exclusion from MSCI

Worst session since 1998. The Jakarta Stock Exchange index lost up to 11.4% this Friday, October 16. The day before, MSCI had announced a consultation to downgrade Indonesia from emerging market status to standalone market status. The session opened with a fall of 8%, enough to trigger a thirty-minute trading halt. Upon recovery, the slide continued.

However, this index provider is the same one that adopted its rules for excluding non-operational companies on October 15. These are the ones that threaten Strategy and Metaplanet. Jakarta gives a taste of what an index release does to a price.

Why MSCI wants to remove Indonesia from its emerging indices

MSCI's October 15 press release is straightforward. During its June review, the index pointed to a “persistent opacity of shareholder structures” and suspicions of “coordinated trading behavior”. However, the Indonesian authorities had promised reforms. On the program, the declaration of shareholders beyond 1% and a finer classification of investors. Added to this were the reporting of shareholding concentrations and a roadmap towards a minimum free float of 15%. Four months later, MSCI judges that “sufficient progress has not been consistently observed”.

Going through the “border market” box has even been ruled out. According to MSCI, this downgrade "would not adequately reflect the depth of the market's problems." Hence the autonomous status, that of Argentina or Lebanon, outside of all the major indices. The consultation runs until April 30, 2027 and the decision will be made no later than June 30, 2027. In the meantime, the freeze in place since January remains in force. No Indonesian value can therefore be added or its weight increased.

The issue is passive funds. An ETF that tracks the MSCI Emerging Markets Index holds Indonesia because the index contains it. Not out of conviction. The day the country comes out, they sell mechanically. Reuters mentions “billions of dollars” of passive investment involved. And net foreign sales have already reached $4.7 billion since January. The Indonesian stock market is down almost 40% in 2026, the worst performance in the world.

Jakarta asks for explanations and the rupee drops

The Indonesia Stock Exchange responded during the day. Its president Jeffrey Hendrik asks MSCI for “clarification on the justification and evaluation criteria”. He also recalls that this is the opening of a consultation and not a final decision. The Ministry of Finance and regulator OJK had not reacted by midday.

On the analyst side, Angus Mackintosh (Aletheia Capital) finds the decision “brutal” in view of the reforms undertaken. But he points out the real problem: the absence of sanctions against actors “clearly involved in price manipulation”. Moody’s and Fitch have already lowered the sovereign outlook to negative this year. The rupee fell to 18,070 per dollar, a breath away from its all-time low of 18,190.

What Indonesia says to Bitcoin treasuries

Back to Strategy. MSCI adopted its rule on non-operating companies on October 15, which targets companies whose assets consist of a stock of bitcoins. The names concerned will be published later. Jakarta shows the mechanism that awaits them: announcement, forced sale of index funds, immediate discount. With a size difference however. Strategy can still buy bitcoin, while Indonesia cannot rebuild its market reputation in a quarter.