BI monitors capital outflows after MSCI's Indonesia market proposal

Jakarta (ANTARA) - Bank Indonesia (BI) is closely monitoring domestic financial markets and potential foreign capital outflows following MSCI’s proposal to reclassify the Indonesian capital market.

“We continue to keep a close watch on developments in our capital market. Naturally, we are monitoring any outflows that have occurred in the wake of this MSCI announcement,” BI Deputy Governor Destry Damayanti said at a press conference in Jakarta on Wednesday.

The MSCI announcement, issued on Friday (October 16), launched a consultation period on a potential reclassification of Indonesia from an “Emerging Market” to a “Standalone Market.” A final decision is expected by the end of June 2027.

The announcement put immediate pressure on the rupiah, which weakened to Rp18,052 per US dollar on Friday and Rp18,050 on Monday (October 19), according to the Jakarta Interbank Spot Dollar Rate (JISDOR).

BI said, however, that the depreciation remained within a relatively normal range amid broader regional pressures.

At its October 20–21 Board of Governors Meeting, BI decided to keep the BI-Rate at 5.75 percent and the lending facility rate at 6.50 percent, while raising the deposit facility rate to 5.00 percent.

Destry emphasized that maintaining exchange rate stability remains BI’s top priority as the central bank deploys targeted policy measures to encourage capital inflows and counter potential outflows.

At the October meeting, BI expanded hedging incentives through Domestic Non-Deliverable Forward (DNDF) instruments for underlying foreign funding activities, including portfolio investments, foreign bank loans, and foreign direct investment (FDI).

The premium reductions were increased to 40 percent for six-month tenors, from 25 percent, and to 45 percent for 12-month tenors, from 30 percent. BI is also maintaining incentives for conventional hedging swap instruments and Local Currency Transaction (LCT) arrangements.

According to Destry, these measures, introduced in June 2026, had attracted US$9.9 billion in foreign capital inflows as of October 20, 2026.

BI also said that a cumulative 100-basis-point increase in its policy rate between May and June 2026 had prompted a broader repricing of domestic assets, improving yield spreads against foreign instruments such as US Treasury securities.

Meanwhile, market regulators and operators have moved to address structural concerns over transparency.

Following consultations with MSCI on Monday, the Indonesia Stock Exchange (IDX) announced plans to disclose share affiliations involving ownership stakes of 1 percent or more and remove stocks with high shareholding concentration from the Jakarta Composite Index (JCI).

Separately, the Financial Services Authority (OJK) has intensified enforcement, imposing penalties and administrative fines totaling Rp2.1 trillion, or approximately US$116.4 million, on three publicly listed companies following investigations into capital market regulatory violations.

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Translator: Rizka Khaerunnisa, Yashinta Difa
Editor: M Razi Rahman
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