For professional clients only. The information contained within this post is not intended for retail clients.
21 October 2026
Last week MSCI threatened to relegate Indonesian equities to standalone-market status, an even lower rating than frontier markets such as Vietnam. The equity market has slumped. This has been well covered by the Financial Times among others.
The warning signs were there. The latest concerns reinforce risks that Fitch had already highlighted earlier this year relating to policy credibility, fiscal discipline, and capital market governance. Fitch revised the outlook on Indonesia’s ‘BBB’ sovereign rating to Negative, from Stable in March 2026.
Our Asian portfolios have had no exposure to Indonesian equities for many years while our fixed income strategy has also steered clear.
Indonesia opened its equity market to foreign investors in the summer of 1989. There were 24 listed companies at that time. There are now almost 1,000 listed companies.
The current situation in the country reminds us of the late 1980s which proved to be a golden period for launching single country investment trusts and open-ended funds in Southeast Asia and other emerging markets. None of these funds generated acceptable returns as the Asian crisis of 1997 loomed large and then rolled across to Russia and Latin America before ending up at Long Term Capital Management’s front door.
Back in 1991 Pakistan opened its markets to foreign investors. This author joined a Citi Group investment trip taking in listed companies in Karachi, Lahore and Islamabad. The most memorable company visit was with DG Khan where we met the two founding brothers. We explained that we were interested in purchasing local equities.
Their response was priceless – ‘you want to buy Pakistan assets? Are you mad? We have spent the whole of our lives trying to get our money out of Pakistan’.