Goldman Sachs Downgrades Indonesian Equities Amid MSCI Concerns

Goldman Sachs downgraded Indonesian equities following MSCI's concerns over transparency and potential downgrading to frontier market status. This might lead to significant outflows, with estimates varying from $2.2 billion to $7.8 billion. An upcoming government meeting aims to address these issues amid ongoing investor concerns.

Goldman Sachs has cut its rating for Indonesian equities, citing transparency issues flagged by MSCI that may lead to a downgrade to frontier market status. The move could result in massive capital outflows from Southeast Asia's largest economy.

Following MSCI's announcement and the freeze on updates for Indonesian securities, the Jakarta Composite Index plunged 7.4%. Goldman Sachs has now reduced its Indonesian equities rating to 'underweight' from 'market weight', projecting continued market pressure.

MSCI's warning arrives as Indonesia faces persistent foreign capital outflows and currency weakness. Projections suggest that potential outflows may range from $2.2 billion in a 'benign' scenario to $7.8 billion if downgraded to a frontier market. The Indonesian government plans to convene soon to discuss the implications.