S&P Dow Jones Indices has placed Indonesia on a watchlist for potential reclassification from emerging-market status, citing concerns over shareholding transparency in its securities market. The index provider indicated it may apply special treatment to Indonesian securities if market conditions deteriorate further. Separately, Turkey has been flagged for a potential downgrade from its current frontier-market status.
Index reclassifications trigger forced selling — funds that track a given index must dump securities that no longer qualify, creating mechanical downward pressure on Indonesian equities and the rupiah. Foreign capital tends to exit ahead of a formal decision, meaning the pain often arrives before any official announcement. ETFs and funds with emerging-market mandates that hold Indonesian exposure face the highest near-term risk.
Ongoing: S&P Dow Jones Indices formal review period and any public consultation announcement. Watch for Bank Indonesia policy statements and any regulatory response on shareholding transparency rules.
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