KUALA LUMPUR, Jan 28 (Bernama) -- Bursa Malaysia snapped its five-day winning streak to close lower on Wednesday, as investors took profit following a cumulative gain of 4.25 per cent over the past five sessions, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) fell 14.76 points or 0.83 per cent to 1,756.49 from Tuesday’s close of 1,771.25. The market bellwether opened 1.46 points lower at 1,769.79, marking the day’s high, and hit a low of 1,750.05 during the mid-afternoon session. Market breadth was negative with losers trouncing gainers 876 to 384, while 525 counters were unchanged, 964 untraded and 94 suspended. Turnover improved to 3.65 billion units worth RM4.41 billion from Tuesday's 3.58 billion units worth RM4.46 billion.
Based on a statement by MSCI Inc. and reporting by Bloomberg, Indonesian equities suffered a sharp sell-off after the index provider warned it would pause key index changes due to persistent investability and free-float concerns.
The benchmark Jakarta Composite Index plunged as much as 7% in early trading, marking one of its steepest single-day declines in recent years and reigniting concerns over Indonesia’s market accessibility for global investors.
What Triggered the Sell-Off
MSCI announced it will:
Immediately halt additions to its indices involving Indonesian stocks
Freeze increases in free-float adjustments, citing:
Tightly held ownership structures
Investor concerns over coordinated price movements
Ongoing “fundamental investability issues”
More critically, MSCI said Indonesia will be reassessed by May if regulators fail to improve transparency — opening the door to:
Lower weightings in the MSCI Emerging Markets Index
A potential downgrade to frontier-market status
Why This Matters for Markets
This is not just a technical index issue. MSCI benchmarks are deeply embedded in global passive and active fund allocations.
Market impact implications:
No immediate forced selling — but index overhang caps upside
If free float is reassessed lower, passive funds may be forced to cut positions
Risk premium on Indonesian equities is likely to rise
“Indonesia is effectively on probation until May,”— Mohit Mirpuri, Senior Partner, SGMC Capital
Free Float: The Core Structural Problem
Investor frustration has been building for years over:
Concentrated ownership among a small group of controlling shareholders
Thin trading liquidity in some of Indonesia’s largest stocks
Heightened risk of price distortions and sharp volatility
MSCI is now considering alternative data sources to assess “true” free float — a move that could materially reduce index weights for affected companies.
Original judgment:
This raises the risk that Indonesia’s index profile structurally shrinks, not just cyclically weakens.
Foreign Flows Were Already Turning
Even before MSCI’s announcement:
Global investors sold US$192 million of Indonesian stocks in the week ended Jan 23
This marked the first weekly outflow in 16 weeks
Original judgment:
MSCI’s warning may accelerate a shift from gradual de-risking to structural underweighting.
Political Overhang Adds to Fragility
The market reaction also reflects broader confidence concerns, following policy shifts under Prabowo Subianto.
Recent developments unsettling investors include:
The removal of long-serving finance minister Sri Mulyani Indrawati
Growing perception of political influence over fiscal and monetary policy
Increased uncertainty over policy continuity
Investor Takeaway
MSCI scrutiny elevates structural risk for Indonesian equities
Index reweighting risk now overshadows near-term fundamentals
Foreign investors may stay cautious until May clarity emerges
Volatility likely remains elevated as Indonesia trades under a global benchmark cloud
For now, Indonesia remains investable — but confidence, liquidity, and transparency have become the market’s decisive variables.
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