January 29, 2026 | 07:39 pm
TEMPO.CO, Jakarta - The American investment bank Goldman Sachs has cut Indonesian equities to "underweight" after Morgan Stanley Capital International (MSCI) temporarily froze the rebalancing of Indonesian stocks.
Following the announcement, the Jakarta Composite Index (IHSG) plummeted by up to 8 percent, triggering a trading halt on Wednesday, January 28, and Thursday, January 29, 2026.
"We expect further passive selling and regard this development as an overhang that will impede market performance," wrote Goldman Sachs analysts in their report on Thursday, January 29, 2026.
MSCI's announcement could result in two things: weight reduction in the Emerging Markets index and a potential downgrade from Emerging Market to Frontier Market.
Goldman Sachs estimates that passive selling could reach US$7.8 billion if Indonesia's status is downgraded to Frontier Market.
In a formal statement, MSCI stated that the freeze was a result of investor concerns regarding the transparency of stock ownership structures.
"While there have been minor enhancements to PT Bursa Efek Indonesia's (IDX) float data feed, investors highlighted that fundamental investability issues persist due to ongoing opacity in shareholding structures and concerns about possible coordinated trading behaviour that undermines proper price formation," MSCI said in its announcement, quoted on Wednesday, January 28, 2026.
With the freeze, MSCI has halted all increases in Foreign Inclusion Factors (FIF) and Number of Shares (NOS); it will not apply index additions to the MSCI Investable Market Indexes (IMI); and it will not implement upward migrations across segments, including from Small Cap to Standard Index.
MSCI stated that it will review the accessibility status of the Indonesian market if significant progress in transparency is not achieved by May 2026.
Read: IHSG Plunge: A Turning Point for Capital Market Reform?
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