Indonesia stock exchange to meet MSCI on Monday, seeking clarification on downgrade warning
MSCI•Indonesia's stock exchange will meet MSCI on Monday to seek clarification after the index provider warned the market could lose emerging-market status. The index fell 5% on Monday, after a $65 billion drop in market capitalization on Friday.
1. Meeting with MSCI
Indonesia Stock Exchange management will hold an online meeting with MSCI to ask about the reasoning behind its warning that Indonesia could be downgraded from emerging-market status. Chief executive Jeffrey Hendrik said the exchange, the Financial Services Authority and most MSCI participants had not expected the announcement; he said market participants, including global investors, agreed Indonesia met the criteria to retain its status.
2. Market impact
MSCI cited concerns about market dysfunction, including coordinated trading behavior and failure to enforce rules. A downgrade to standalone status would exclude Indonesian stocks from global indexes tracked by billions of dollars in passive investment. Indonesia's main stock index fell 5% on Monday to a six-year low, following its worst trading day since 1998; the exchange also halved the daily price-down limit to 7% to reduce volatility.
