Indonesian Stock Market Faces Tumult Amid MSCI Downgrade Warnings

Indonesian authorities moved swiftly to counter capital flight from the stock market following a downgrade warning by MSCI that caused a substantial selloff. Measures were introduced to bolster confidence but concerns over fiscal policies and governance remain, affecting investor sentiment and the rupiah's value.

Amid the turmoil in Indonesia's stock market, authorities on Thursday raced to address capital outflows triggered by MSCI's downgrade warning. The market saw an alarming 9% decline over two days, echoing the sharpest drop since the pandemic era, as the national economy grapples with weakened investor confidence.

The decline was exacerbated by foreign investors exiting due to fiscal concerns under President Prabowo Subianto's administration. His fiscal deficit expansion and the pivotal appointment of his nephew, Thomas Djiwandono, to the central bank further unsettle markets, especially after the abrupt dismissal of the esteemed Finance Minister, Sri Mulyani Indrawati.

The Jakarta Composite Index managed a mild recovery after regulators doubled the free-float requirement for listed firms to 15%. Despite the rupiah nearing a record low, officials, including Financial Services Authority head Mahendra Siregar, expressed optimism for swift resolution with MSCI, aiming for stabilizing measures by March.

(With inputs from agencies.)