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MSCI warning triggers a sell-off in Indonesian stocks

Market update
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Indonesia
MSCI
Market Update
Jakarta

MSCI warning triggers a sell-off in Indonesian stocks

by Abhilash Narayan, Investment Strategist, Chief Investment Office, HSBC Private Bank and Premier Wealth
Jan 29, 2026

Highlights: The Jakarta Composite Index (JCI), Indonesia’s benchmark stock index, fell nearly 8.7 per cent intraday on 28th January 2026, triggering a trading halt, before recovering some ground (at the time of writing). We remain Neutral on Indonesia equities as the sell-off was driven by technical factors rather than by macroeconomic factors or earnings concerns.

  • MSCI concerns: Indonesian stocks tumbled today after MSCI Inc, a leading index provider raised fresh concerns about the investability of Indonesian stock markets due to low free float and highlighted the risk of downgrade from Emerging Market status to Frontier Market status
  • Robust macroeconomic fundamentals: While Indonesian have been hit by technical factors, the macroeconomic fundamentals remain robust. We expect Indonesia’s GDP growth to accelerate to 5.2 per cent in 2026 compared to 5.0 per cent in 2025. Monetary policy is likely to be supportive as we expect Bank Indonesia to cut interest rates by 75bps cumulatively in 2026
  • Neutral on Indonesian equities: We remain Neutral on Indonesia equities as the sell-off was driven by technical factors rather than by macroeconomic factors or earnings concerns. It’s rather driven by technical factors. Even before today’s sell-off MSCI Indonesia traded at a P/E ratio of nearly 13.4x, cheaper than its own 10-year average. In the near-term, we believe the upside risk is capped, while downside risks have been partially priced-in, especially after today’s sell-off. MSCI is scheduled to take the final decision on index classification and weights for Indonesian stocks in May 2026, which gives the regulators and MSCI substantial time to discuss the concerns and potentially address some of them

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