Indonesia's Foreign Stock Selling Exceeds Crisis Totals as Investors Await MSCI Reform Verdict

Rp84.99 Trillion in Selling Before the November Review

Foreign investors sold a net Rp84.99 trillion of Indonesian shares through October 9, 2026, exceeding the totals recorded during both the 2020 pandemic and the 2008 financial crisis. With MSCI's next index announcement scheduled for November 11, the pressure is testing whether Indonesia's market reforms can turn regulatory progress into renewed investment.

The selling continued to weigh on prices on October 13. The Jakarta Composite Index, known locally as the IHSG, opened at 5,914.98, down 0.36%, and was down 1.31% at 5,858.52 by 9:24 a.m. Jakarta time. A subsequent trading update put it at 5,832.76, a decline of 1.74%. These were readings during the session, not closing figures.

Indonesia's Financial Services Authority, OJK, says its reform program is about 90% complete. FTSE Russell has retained Indonesia's secondary emerging market classification without adding it to its watchlist. Yet neither development has ended foreign selling, while analysts expect MSCI's restrictions on positive index changes could extend into 2027.

The central distinction is between adopting rules and proving that they work. Investors and index providers want reliable ownership records, shares genuinely available for public trading, and consistent enforcement against manipulation. Overseas funds also need reasons to expect attractive returns despite a weak rupiah and high US government bond yields.

There is also an unresolved discrepancy in the reported selling totals. Another October account puts cumulative foreign outflows at Rp109.45 trillion through October 7, higher than the Rp84.99 trillion reported through October 9. The difference makes the size of the retreat harder to establish precisely, although both accounts describe substantial pressure.

How the Selling Compares With Past Crises

Using the Rp84.99 trillion figure, foreign net selling in 2026 already exceeds the Rp53.84 trillion recorded throughout 2020 by Rp31.15 trillion, or about 58%. It is Rp34.82 trillion, or approximately 69%, above the Rp50.17 trillion recorded in 2008.

Those are comparisons of nominal rupiah amounts. They do not adjust for inflation, changes in market size or the foreign ownership base. They also compare part of 2026 with two complete calendar years. The figures show the scale of selling, but do not establish that today's economic conditions are worse than those earlier crises.

The conflicting October totals require separate treatment. One account records Rp828.65 billion of foreign selling on October 7 and cumulative outflows of Rp109.45 trillion. The account through October 9 records Rp84.99 trillion. No explanation establishes whether they use different trading segments, calculation methods or another distinction. They should not be combined into a single series.

The current retreat follows a smaller reported outflow in 2025. LSEG data cited in January put foreign net selling that year at Rp13.96 trillion. Without confirmation that all these figures use the same scope, that comparison is best treated as an indication of direction rather than a precise measure of acceleration.

What MSCI's Freeze Actually Restricts

MSCI's January 27 intervention focused on unclear ownership structures, concentrated holdings and the risk of coordinated trading that could distort prices. The restrictions freeze increases in Foreign Inclusion Factors and share counts used in its indexes, block new Indonesian stock additions and suspend upward moves between index size segments.

A Foreign Inclusion Factor represents the proportion of a company's shares MSCI considers available to international investors for index purposes. Free float is the portion available for public trading rather than tied up in controlling or strategic holdings. Unclear ownership relationships can make that tradable portion difficult to measure.

The freeze is not a ban on buying Indonesian shares. It does not automatically remove every Indonesian company from MSCI indexes or require every foreign investor to sell. It does, however, restrict changes that could otherwise attract purchases from funds following those benchmarks.

In May, six Indonesian stocks were removed from MSCI's Global Standard Index and 13 from its Small Cap Index. MSCI also retained the possibility of deleting securities identified through the High Shareholding Concentration framework and selectively using ownership disclosures above 1% to refine free float estimates.

A country classification downgrade would be a separate, more serious development. Funds restricted to emerging markets could need to reduce or remove Indonesian holdings. Goldman Sachs estimated potential outflows of up to US$7.8 billion in a downgrade scenario in January. That was a conditional estimate, not a forecast of confirmed selling.

The Reform Plan Has Eight Parts

OJK's eight action plans cover liquidity, transparency, governance, enforcement and market development. The document provides a broader agenda than simply responding to one index provider.

The proposed minimum free float rises from 7.5% to 15%, doubling the threshold. OJK's plan says new issuers would apply the requirement at their initial public offering, while companies already listed would receive a transition period. The document does not give a single deadline by which every existing issuer must comply.

Ownership reforms include stronger disclosure of ultimate beneficial owners, meaning the people who ultimately own or control holdings, and relationships between shareholders. OJK also instructs the Indonesian Central Securities Depository, KSEI, to provide more detailed and reliable investor classifications and shareholding information.

The remaining measures include preparing exchange demutualization, stronger action against manipulated transactions and misleading information, continuing education for directors, commissioners and audit committees, and accountant certification for those preparing public company financial statements. Demutualization changes an exchange's ownership structure, with OJK presenting it as a way to improve governance and reduce conflicts of interest.

The plan also calls for coordinated development of market demand, supply and infrastructure. These measures address different problems: more public shares can improve trading access, better records can clarify ownership, and enforcement can deter conduct that undermines prices. Progress in one area does not automatically resolve weaknesses in another.

Recognition Has Not Yet Ended Restrictions

OJK's April reform statement, published on April 21, welcomed MSCI's April 20 update on Indonesian free float assessments. It said MSCI had acknowledged ownership disclosure above 1%, more detailed investor classifications, the concentration framework and a higher minimum free float threshold.

OJK Board of Commissioners Chairperson Friderica Widyasari Dewi said implementation would continue beyond that initial recognition:

Going forward, the implementation of these reform measures will continue to be maintained in a consistent, measurable, and sustainable manner, and further strengthened through active coordination with various stakeholders, including global market participants,

The statement said MSCI was assessing new data and feedback from global market participants for its May Index Review and June Market Accessibility Review. Recognition of policy changes was therefore an intermediate step, not confirmation that restrictions had been lifted.

On October 8, OJK Deputy Commissioner Eddy Manindo said approximately 90% of the reform program was complete and that major concerns raised by MSCI and FTSE had been answered since April and May. That is OJK's assessment. It does not establish that MSCI has accepted the reforms as sufficiently effective to end its freeze.

OJK Regulation No. 13 of 2026 on Stock Exchange Shareholders took effect on September 15, providing a legal foundation for changes to exchange ownership. Implementation still requires corporate decisions and procedures. Reported reforms also include removing the Rp50 minimum share price in the regular market and a measured return of short selling, in which investors sell borrowed shares hoping to buy them back at a lower price.

October Changes Put More Holdings Under Scrutiny

On October 9, acting corporate secretary Aulia Noviana Utami Putri described changes by the Indonesia Stock Exchange and KSEI to ownership data and concentration monitoring. Records using 39 investor classifications now include separate domestic and foreign ownership information, with distribution through the exchange website on the second day of the following month.

Earlier reform reporting described a planned expansion from nine investor categories to 27 subcategories. October accounts describe 39 classifications. The later figure indicates a broader reported system, although the exact relationship between those category structures is not explained.

The exchange also expanded the concentration review using a price impact ratio by lowering its market capitalization threshold from above Rp10 trillion to above Rp5 trillion. That halves the threshold and brings a wider group of companies into the assessment. The test seeks to identify shares with aggressive price movements despite limited liquidity.

Mirae Asset Sekuritas analyst Wilbert Arifin said the High Shareholding Concentration list contained 63 stocks, including 37 added through the new test. Those 37 represent approximately 59% of the list. Inclusion is a concentration warning, not by itself a finding of illegal manipulation.

The distinction matters for index eligibility. A company can satisfy a nominal public ownership threshold while still leaving investors uncertain about how many shares are genuinely available to trade. More detailed ownership records and concentration tests aim to expose that gap.

Enforcement Must Produce Credible Outcomes

OJK imposed administrative sanctions or written orders on PT Repower Asia Indonesia Tbk, ticker REAL, PT Multi Makmur Lemindo Tbk, ticker PIPA, and related parties on February 6. At the end of February, it imposed Rp5.35 billion in fines on a social media figure for price manipulation involving information circulated about stock trading during 2021 and 2022.

The regulator also announced administrative fines against three parties connected with trading in PT Impack Pratama Industri Tbk, ticker IMPC, during January through April 2016. These cases demonstrate enforcement activity, although their underlying trading periods precede the current reform program.

Separately, an account citing unnamed people describes possible forthcoming findings involving renewable energy shares and a coal mining holding company, with potential fines in the hundreds of billions of rupiah and penalties for securities firms. These are unconfirmed allegations. No named final decision, complete list of parties or publication date has been established.

RHB Sekuritas President Director Thomas Nugroho sees both global pressure and domestic confidence problems behind the selling. His assessment is that investors need consistent implementation before increasing exposure again. Wilbert similarly distinguishes the number of sanctions from evidence that manipulation cases have been resolved effectively.

FTSE's Decision Offers Reassurance, Not a Guarantee

FTSE Russell retained Indonesia in its secondary emerging market group on October 7 and did not place it on its watchlist. OJK chief capital market supervisor Hasan Fawzi described the decision as a positive signal about confidence in Indonesia's market integrity and accessibility.

FTSE's assessment recognized disclosure of shareholders above 1%, more detailed investor classifications, ownership concentration measures and efforts to increase minimum free float. Yet maintaining the country classification did not end every restriction on index treatment. Certain changes had been deferred in the March, June and September reviews, and FTSE plans another update before its December 2026 review.

The immediate market response also showed the limits of classification reassurance. On October 7, the IHSG fell 0.75% to 6,146, while foreign investors sold a net Rp828.65 billion of shares. A favorable classification decision did not outweigh the other reasons investors were reducing exposure.

Mirae Asset Sekuritas research head Rully Arya Wisnubroto cautions that FTSE and MSCI use different assessment frameworks. Samuel Sekuritas Indonesia Managing Director Harry Su sees FTSE's decision chiefly as reducing downside risk, with any foreign buying likely to favor liquid companies with substantial public ownership and strong fundamentals.

Market activity outside the stock index gives a different perspective. Reported figures through September show Rp186.03 trillion raised through the capital market, 29 prospective public offerings worth an indicative Rp26.47 trillion, and mutual fund net assets of Rp637.07 trillion. Investor identification numbers exceeded 32 million, up 58% during 2026. These measures show continuing participation and financing, not proof that foreign confidence has recovered.

Currency, Bond Yields and Oil Add Pressure

Rully cited the rupiah approaching Rp18,000 per US dollar and US Treasury yields around 5.2% to 5.3% as additional pressures. Foreign net selling in September alone was reported at approximately Rp10.2 trillion. Currency depreciation can reduce returns when foreign investors convert rupiah proceeds back into dollars, while higher US yields make competing assets more attractive.

University of Indonesia capital market observer Budi Frensidy also points to competition for investment. Taiwan and South Korea offer exposure to artificial intelligence and technology, while Vietnam offers strong economic growth and reforms to foreign access. Indonesia remains relatively concentrated in banks and commodities.

Energy prices added another concern on October 12. Brent crude closed at US$106.65 a barrel, up US$1.93 or 1.8%, and US West Texas Intermediate closed at US$93.74, up US$1.89 or 2%. Reports linked the gains to missile and drone attacks on Saudi Arabia and concern about energy supply following wider regional conflict.

On October 13, financial stocks fell 1.05%, basic materials 0.89% and technology 0.84% in a trading update. Bank Rakyat Indonesia, Bank Central Asia, Telkom Indonesia, VKTR Teknologi Mobilitas and Dian Swastatika Sentosa were among the index's reported drags. By 9:24 a.m., turnover reached Rp2.36 trillion, compared with Rp264.6 billion around 9 a.m.

The opening accounts differ slightly on exact early readings and session highs. One puts the index at 5,885.81 at 9 a.m.; another describes it near 5,890. Their consistent finding is that losses deepened during the morning. The trading figures do not identify how much of that day's decline came from foreign selling.

The Dates and Evidence Investors Are Watching

The November review follows months of policy changes and market pressure. The January market rout erased roughly US$80 billion in market value and prompted emergency action. Accounts put January 28's decline at about 7% to 7.4%, followed by a trading halt during January 29's steep intraday fall. That second day's closing loss narrowed to about 1%, so the worst intraday declines should not be presented as cumulative closing losses.

• January 27, 2026: MSCI announced restrictions following concerns about ownership transparency and coordinated trading.
• February 2: OJK outlined its reform response.
• April 20 and 21: MSCI issued a free float update, followed by OJK's statement welcoming recognition of reforms.
• May: Six Indonesian stocks left MSCI's Global Standard Index and 13 left its Small Cap Index.
• September 15: OJK Regulation No. 13 of 2026 took effect.
• October 7 to 9: FTSE retained Indonesia's classification, OJK reported approximately 90% reform completion, and expanded ownership monitoring was described.
• November 11: MSCI's next index rebalancing announcement is scheduled.
• Before the December review: FTSE plans an update on Indonesian securities.

Wilbert expects a separate announcement about MSCI's treatment of Indonesia in late October. That analyst expectation should be distinguished from the November 11 index announcement. He expects the freeze to continue, with a base case of 18 to 24 months for reform completion, pointing to August 2027 through February 2028. Phintraco Sekuritas analyst Desy Erawati also projects an end to the freeze in the second half of 2027. Neither forecast is an MSCI commitment.

Even lifting restrictions would not guarantee immediate large inflows. Wilbert notes a possible delay of one review period for certain changes, while excluded stocks would need to satisfy eligibility requirements again. Kiwoom Sekuritas research head Liza Camelia Suryanata looks for sustained foreign net buying over several weeks, spread across liquid stocks and supported by healthy trading.

For retail investors, Mirae Asset Sekuritas senior market analyst Nafan Aji Gusta recommends limiting concentration in shares sensitive to foreign flows, preserving portfolio liquidity and assessing company fundamentals and valuations. His key distinction is between a price decline driven by index sentiment and one caused by deterioration in the business. Indonesia's next test is whether measurable improvements in ownership and trading can support confidence alongside better currency conditions and earnings prospects.

Key Points

• Foreign net selling was reported at Rp84.99 trillion through October 9, exceeding nominal totals for 2008 and 2020.
• A separate Rp109.45 trillion total through October 7 remains unreconciled.
• MSCI's freeze limits positive index changes but does not require all foreign investors to sell.
• OJK reports approximately 90% reform completion; MSCI has not confirmed an end to restrictions.
• FTSE retained Indonesia's secondary emerging status and plans another update before December.
• Ownership disclosures, a 15% free float target and broader concentration testing are central reform measures.
• MSCI's November 11 announcement is the next scheduled index milestone; forecasts of relief in 2027 remain uncertain.