MSCI warnings drain foreign money from Indonesian equities

Indonesia is becoming less popular with international investors amid warnings from MSCI.

On Oct. 15, the global index provider warned that it might classify Indonesia as a “standalone” market, separate from its “frontier” and “emerging” categories that govern billions of dollars in linked funds. MSCI is concerned about opaque shareholding structures and low free float in the Jakarta stock market.

This isn’t MSCI’s first statement on the matter; since its first warnings in January, foreign holdings of Indonesian equities have fallen by 35%. If Indonesia is reclassified, funds benchmarked to MSCI’s emerging-market indices would likely have to sell. A final decision is due next June.