MSCI Downgrade Sends Indonesian Stocks Down 11%

Indonesia’s equity benchmark fell 11% on Friday after MSCI said the country’s stock market no longer qualified for “emerging market” status. MSCI is preparing to remove Indonesia from a suite of products tracked by global investors, a move described as a major setback likely to send money fleeing. The rupiah weakened about 0.8% to 95.0550 per dollar.

MSCI decision rattles Indonesian markets

The announcement came as Asian stocks rebounded from heavy selling in the previous session. Investors elsewhere in the region bought shares, but Indonesia moved sharply in the opposite direction: its benchmark dropped 11% after MSCI’s assessment and planned product removal.

MSCI’s market classification and products tracked by global investors drove the Indonesian selloff, according to the source report. The report doesn’t describe any change to Indonesia’s laws or a formal transfer of governmental authority. Instead, the immediate effects fell on share prices and the rupiah, alongside the prospect of investment outflows.

Across the wider region, Japan’s tech-heavy Nikkei rose 1.8%, recovering some of Thursday’s almost 5% fall. South Korea’s KOSPI climbed 2.8% after plunging nearly 8% in the previous session. Taiwan’s stock benchmark gained 0.7%, Hong Kong’s Hang Seng added 1.1%, and mainland Chinese blue chips edged 0.3% higher.

Investors weigh technology and debt risks

Heavy selling in the previous session followed concerns about cloud company CoreWeave’s debt and the financing behind the artificial-intelligence boom. Shares in Nvidia-backed CoreWeave recovered some ground on Thursday after starting the session by extending Wednesday’s 15.5% slump.

Reports that CoreWeave’s bond yields had reached levels associated with distressed debt set off a broad global selloff centered on AI-related shares. Analysts also pointed to pressure on memory-maker shares after China’s ChangXin Memory Technologies (CXMT) reported progress on a next-generation DRAM architecture that could intensify competition with established manufacturers.

“Global markets are getting very noisy once again after a period of low volatility: Wall Street is whipsawing, bond yields are swinging, currency markets are doing backflips, and commodity prices are running in multiple directions,” Kyle Rodda, a markets analyst at Capital.com, wrote in a client note. He said markets could face a “protracted period” of volatility as investors assess technology-company earnings due in the coming weeks and the direction of interest rates in the United States and other major economies.

Federal Reserve Chair Kevin Warsh and other global central bank officials were scheduled to speak during the day at the IMF-World Bank Annual Meetings in Bangkok. Rodda said Warsh’s “notorious reticence and outright disdain for anything that resembles ‘forward guidance’” would leave market participants trying to infer insight from his remarks.

Bond markets stabilized after traders bought U.S. Treasuries and other safe-haven sovereign debt, sending yields plunging on Thursday. Most Japanese government bond yields rose, retracing about half of Thursday’s decline. The dollar moved toward its first weekly loss in five weeks as lower U.S. yields reduced its appeal. U.S. stock futures were lower, with Nasdaq futures down 0.3% and S&P 500 futures down 0.1%.

Gold fell 0.4% to $4,154.51 after gaining 1.6% on Thursday amid safe-haven demand. Brent crude futures fell 0.4% to $105.51 a barrel, while U.S. West Texas Intermediate crude futures fell 0.6% to $97.43. Investors weighed Middle East risks and possible U.S. steps to ease restrictions on shadow-fleet tankers.