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What is the story about?
The Indonesian stock market's worst rout since 1998, along with multiple other factors on the MSCI could trigger inflows worth over $10 billion into India's equity markets across 2027 and 2028, according to analysts.
Index service provider MSCI has raised concerns on the investability of Indonesian stocks, citing low free float for most of the large companies. MSCI has also warned of a downgrade to the country's rating to a "frontier market" from an "Emerging Market" as a consequence of these issues remaining unresolved.
The concerns led to foreign investors offloading shares worth over $371 million on Wednesday on the Jakarta Composite, which fell 7% that day, and followed up that fall with another 10% decline on Thursday, triggering a trading halt for 30 minutes.
The weightage of Indonesia in the MSCI Emerging Market index is at nearly 1.1%, with dedicated Emerging Market, APAC, Active & Passive Funds having invested nearly $35 billion in that market.
Indonesian stock market is among the most foreign owned within the Emerging Markets and also the greatest overweight position among EM funds, according to CLSA.
In case a downgrade does come by, this will be the sixth such instance, after Sri Lanka, Jordan, Argentina, Morocco, and Pakistan, who were downgraded by MSCI in the past.
Analysts believe that in case of a downgrade to Indonesia, the subsequent MSCI rejig can result in Indian equities getting net passive inflows to the tune of $1 billion.
MSCI has also begun consultation process for a potential reclassification of Greece to a "Developed Market" from "Emerging Market" currently.
The implementation of this has been targeted in the MSCI's review for August 2026. Analysts estimate Greece's weightage in the MSCI EM index at close to 0.5%.
Analysts are projecting Indian equities to see passive inflows worth nearly $650 million in case of a potential upgrade to Greece.
MSCI is also likely to launch consultation process for considering an upgrade to South Korea's stock market status to a "developed market" from the current "Emerging Market."
The process is likely to be initiated in June 2026. South Korean equities currently have a weightage of nearly 12% in the MSCI EM index. Implementation of this move will be spread over four quarters.
Analysts believe that an upgrade for South Korea could result in passive inflows worth up to $10 billion over calendar year 2027 and 2028.
Index service provider MSCI has raised concerns on the investability of Indonesian stocks, citing low free float for most of the large companies. MSCI has also warned of a downgrade to the country's rating to a "frontier market" from an "Emerging Market" as a consequence of these issues remaining unresolved.
The concerns led to foreign investors offloading shares worth over $371 million on Wednesday on the Jakarta Composite, which fell 7% that day, and followed up that fall with another 10% decline on Thursday, triggering a trading halt for 30 minutes.
Why Indonesia's Downgrade Warning Is Significant?
The weightage of Indonesia in the MSCI Emerging Market index is at nearly 1.1%, with dedicated Emerging Market, APAC, Active & Passive Funds having invested nearly $35 billion in that market.
Indonesian stock market is among the most foreign owned within the Emerging Markets and also the greatest overweight position among EM funds, according to CLSA.
In case a downgrade does come by, this will be the sixth such instance, after Sri Lanka, Jordan, Argentina, Morocco, and Pakistan, who were downgraded by MSCI in the past.
What Does This Mean For India?
Analysts believe that in case of a downgrade to Indonesia, the subsequent MSCI rejig can result in Indian equities getting net passive inflows to the tune of $1 billion.
An Upgrade For Greece?
MSCI has also begun consultation process for a potential reclassification of Greece to a "Developed Market" from "Emerging Market" currently.
The implementation of this has been targeted in the MSCI's review for August 2026. Analysts estimate Greece's weightage in the MSCI EM index at close to 0.5%.
Greece Upgrade & Impact On India
Analysts are projecting Indian equities to see passive inflows worth nearly $650 million in case of a potential upgrade to Greece.
An Upgrade For South Korea?
MSCI is also likely to launch consultation process for considering an upgrade to South Korea's stock market status to a "developed market" from the current "Emerging Market."
The process is likely to be initiated in June 2026. South Korean equities currently have a weightage of nearly 12% in the MSCI EM index. Implementation of this move will be spread over four quarters.
Bounty For India?
Analysts believe that an upgrade for South Korea could result in passive inflows worth up to $10 billion over calendar year 2027 and 2028.
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