BENGALURU: Indonesian stocks were on pace for their biggest one-day drop in more than 14 years on Wednesday after MSCI warned of a possible downgrade to frontier status, while currencies in emerging Asian economies advanced as the dollar struggled near a four-year low.
The Jakarta Composite Index tumbled 8 percent in afternoon trade, triggering an automatic trading halt designed to manage extreme volatility.
Trading resumed after 30 minutes, and the index was last down 8.3 percent, lingering near its three-month low and on track for its worst day since September 2011.
MSCI’s move to freeze Indonesian stocks from entering or growing in its indexes and warning on transparency issues exacerbates existing concerns around a weak rupiah, a widening fiscal deficit, and the central bank’s autonomy.
Foreign investors sold 13.96 trillion rupiah (USD834.43 million) worth of Indonesian stocks in 2025 and the selloff has continued in January, according to LSEG-compiled data.
“The (MSCI) announcement underscores persistent foreign investor concerns over ownership transparency and price discovery in Indonesia,” said Andrey Wijaya, head of research with RHB Indonesia.
“Without clearer visibility on ultimate beneficial ownership and concentration, valuation re-rating is likely to stay constrained despite improving corporate fundamentals.”
Meanwhile, Asian currencies gained as the US dollar traded near its four-year low after President Donald Trump brushed off its recent weakness, exacerbating greenback selling.
The Malaysian ringgit appreciated 1 percent to hit its highest point since May 2018, gaining 3.4 percent in the past six sessions.
“The AI boom, fiscal consolidation and strong growth are among the idiosyncratic factors that keep up the strong sentiment towards the MYR and back its outperformance relative to other peer currencies,” Maybank FX analysts said in a note.