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Since MSCI’s broader review of Indonesia’s equity representation and weightage earlier this year, all related changes have been closely scrutinized by investors. As part of its rebalancing exercise, the equity index provider officially removed six Indonesian stock counters (mix of commodity trading, renewables, chemicals etc.) from the Global Standard Index (GSI) during its May 2026 review. The small cap category also witnessed few exits, while one counter was moved to the small-cap category. High shareholding concentration was likely one of the primary reasons behind the exclusion, following extended consultations between the index provider and regulators in recent months. The next review is due in August 2026. These changes are likely to have lowered the country’s weight in the emerging markets index to 0.5-0.6% vs nearly 0.8% before the recent review, with the country mix presently dominated by Taiwan, China and India. This lower representation for Indonesia will push investors to rebalance portfolios, resulting in modest incremental foreign outflows.
Concerns over the MSCI review, geopolitics and domestic developments continued to trouble the rupiah, as the currency slipped past 17500/USD, to be amongst the regional underperformers on YTD basis. A strong growth report for 1Q26 also failed to enthuse the currency as the boost stemmed from higher government spending and consumption, rather than investments or trade (Indonesia growth: Firm start, speed bump ahead). While portfolio inflows into equity markets have been subdued, a sharp increase in returns on BI bills i.e., SRBIs have drawn strong offshore inflows. Total outstanding SRBIs are the highest in nearly two years, with ~a fifth of the issuance now held by non-residents vs 12% in Nov25. The benchmark rate remains unchanged at 4.75%, with a yawning spread vs 12M SRBI rate which stands at ~6.4-6.5%, resulting in defacto stealth tightening, marking a floor below short-end bond yield. Rupiah weakness despite sustained intervention, declining foreign reserve levels, and the widening spread versus SRBIs have revived the possibility of a rate increase at the upcoming policy review.
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