Back in January, MSCI fired a warning shot at Jakarta. On Friday it fired the real thing.
Indonesian markets extended their selloff on Monday, with stocks deepening their worst rout in almost 30 years and losses spreading to bonds and the rupiah after MSCI warned the country may face a two-step downgrade: straight from Emerging Market to "Standalone" status, skipping Frontier altogether.
The Jakarta Composite (JCI) closed down 3.6% on Monday after crashing 11.6% on Friday, its biggest one-day drop since January 1998. The combined two-session drop of almost 15% is steeper than any two-day stretch during the 1998 Asian financial crisis, and the index hit a six-year low intraday.
Regular readers will recall that we first flagged this exact risk in January, when Indonesian stocks were halted for 30 minutes after crashing on MSCI "investability" concerns. Back then MSCI merely froze index additions and dangled the threat of a downgrade to frontier status if Jakarta did not clean up its free-float data. The market w
