LPEM Report: Capital Outflows from Indonesia Reach Rp17.8 Trillion Due to MSCI

Jakarta — The Institute for Economic and Social Research at the Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) recorded that foreign capital flows exiting the Indonesian stock market reached US$1.38 billion following announcements by MSCI and Moody’s on 27 January 2026.

As is known, MSCI announced the results of its consultation regarding the assessment of free float shares in Indonesia within the MSCI Global Standard Indexes. MSCI highlighted persistent concerns among global investors regarding the transparency of share ownership structures in Indonesia, despite minor improvements in free float data from the Indonesia Stock Exchange (BEI).

Meanwhile, credit rating agency Moody’s downgraded Indonesia’s economic outlook from stable to negative following the MSCI announcement. However, Moody’s maintained Indonesia’s sovereign credit rating at Baa2 in their latest assessment.

“Since the MSCI announcement, Indonesia has experienced capital outflows from the stock market reaching US$1.01 billion. Furthermore, Indonesia has also experienced capital outflows from the bond market reaching US$0.37 billion since Moody’s revised its assessment of economic conditions,” according to the Macroeconomic Analysis Series from LPEM FEB UI, 27 February 2026.

During this period, LPEM FEB UI economists noted that cumulatively, Indonesia recorded capital outflows of US$1.06 billion over the past 30 days. As a result, the yield on 10-year government bonds increased by 6 basis points, rising from 6.31% on 19 January to 6.40% on 13 February.

“Cumulatively, capital outflows over 30 days totalled US$1.06 billion, equivalent to approximately Rp17.8 trillion (at the rate of $1 = Rp16,832). Additionally, news of the President’s nephew’s appointment as the new Deputy Governor of Bank Indonesia further undermined investor confidence. Bank Indonesia needs to further demonstrate its independence,” the LPEM FEB UI Instagram account stated.

During this period, LPEM FEB UI also recorded that yields on one-year government bonds surged by 20 basis points, rising from 4.67% to 4.87%, indicating that capital outflows in the bond market occurred across various maturity tenures.

However, capital outflows and yield increases have remained relatively contained following Moody’s announcement, which only downgraded its assessment of economic conditions without lowering Indonesia’s sovereign rating. To reduce pressure from capital outflows, Bank Indonesia has actively increased its holdings of government securities to ease pressure on the exchange rate.

As a result, Rupiah depreciation has remained relatively limited. Since the end of last month, the Rupiah has depreciated by only 0.27%, and has even appreciated by 0.44% on a month-on-month basis over the past 30 days. However, the Rupiah recorded depreciation of 0.84% year-to-date and has depreciated by 3.74% on a year-on-year basis over the past year, posting weaker performance compared to most emerging market currencies.

“Most emerging market currencies have actually recorded appreciation during 2026, including the Brazilian Real, Malaysian Ringgit, South African Rand, Russian Ruble, Philippine Peso, Chinese Yuan, and Thai Baht,” LPEM FEB UI economists noted.

S&P Global Ratings also highlighted Indonesia’s fiscal pressures, particularly the rising costs of debt servicing. This has increased the risk of a downgrade to Indonesia’s sovereign credit profile and could trigger a ratings reduction.

“Interest payments are”very likely” to exceed a key threshold of 15% of government revenue,” said Rain Yin, sovereign analyst at S&P Global Ratings, during an online webinar on the Asia-Pacific region, according to The Edge Malaysia and Bloomberg, 27 June 2026.

Should it remain above this threshold on a sustained basis, this could trigger a more negative view of the rating, Yin added. This has the potential to further pressure Indonesia’s financial markets going forward. S&P is expected to release its Indonesia debt rating report in July. Meanwhile, Fitch Ratings is expected to publish Indonesia’s rating in March 2026, and Moody’s in April.