Rupiah, stocks choppy as fresh MSCI concerns pressure markets
BENGALURU: Indonesia’s rupiah weakened and stocks traded unevenly on Friday after index provider MSCI raised fresh concerns about the country’s investability, while South Korean shares erased early gains after hitting a record high.
The MSCI EM Asia gauge shed early gains to fall nearly 1 percent in afternoon trading, retreating from a record peak as South Korea’s KOSPI index reversed course to drop as much as 2 percent.
The reversal follows a 17 percent surge in the KOSPI over the past six sessions, fuelled by a rush into chipmakers. Market holidays in the US and Taiwan and signs of an early snag in US-Iran ceasefire talks lifted oil prices and dampened risk appetite.
Israeli strikes in southern Lebanon and US Vice President JD Vance’s cancellation of talks with Iranian negotiators raised fresh concerns about peace prospects, prompting investors to pare equity exposure.
Indonesia’s benchmark Jakarta Composite Index drifted in a tight range around its prior close, last down 0.7 percent, while the rupiah dipped as much as 17,850 per dollar before recouping to around 17,820 by noon.
A warning from MSCI on limited visibility in shareholdings and coordinated trading behaviour, along with a downgrade of Indonesia’s information flow criterion to negative, has dealt a fresh blow to already battered capital markets.
Foreign investors have pulled around USD3.65 billion in 2026 from Indonesian equities. A follow-up major test will be a market classification review next week, where a downgrade to frontier status could trigger another bout of outflows.
Nevertheless, market participants broadly expect Southeast Asia’s top economy to retain its emerging markets status.
“The probability (of a downgrade) is low because stocks within MSCI Indonesia that had free float issues have already been exposed and the said stocks have been excluded already,” said Jayden Vantarakis, head of ASEAN equity research at Macquarie Capital.
Josua Pardede, chief economist at PermataBank, said a downgrade next week was not certain. “The weak points remain concentrated in information flow and foreign exchange market liberalization, rather than a broad collapse across the whole accessibility framework”.
Separately, MSCI also flagged persistent concerns over investability in Turkey and lowered its information flow criterion to “negative”, citing limited transparency in shareholding structures.
South Korea’s benchmark KOSPI index fell as much as 2.1 percent after advancing 3.6 percent to record highs earlier in the day. Singapore stocks edged 0.6 percent lower, retreating from an all-time high in the previous session.
Equities in the Philippines also pared early gains to trade largely flat, while the peso fell to 60.762 per dollar. The country’s central bank raised key rates for a second consecutive meeting on Thursday.