MSCI Rebalancing: Threat or Opportunity?

JAKARTA, KOMPAS.com - Indonesia’s stock market is entering a crucial phase following Morgan Stanley Capital International’s (MSCI) postponement of the MSCI Indonesia Index rebalancing until June 2026.

Behind this decision, concerns have emerged regarding foreign fund outflows (outflow) amounting to hundreds of millions of US dollars.

The Research Division of PT Henan Putihrai Sekuritas (Henan Sekuritas) revealed that on 20 April 2026, MSCI established two main policies in the MSCI Semi-Annual Index Review (SAIR), to be announced on 12 May 2026.

First, the removal of stocks with High Shareholding Concentration (HSC) status as per the list released by the Indonesia Stock Exchange (BEI) on 2 April 2026.

This policy immediately triggered concerns among market participants, particularly regarding potential foreign fund outflows.

However, Henan Sekuritas views this narrative as overly simplistic in describing the market conditions.

Based on an analysis of seven MSCI-based Exchange-Traded Funds (ETFs) with total assets under management of 73.9 billion US dollars, the emerging pattern is not uniform.

From February to mid-April 2026, there were varying portfolio rotations among the ETFs, opening opportunities for price dislocations in certain stocks.

“The discussions in the market since the announcement have tended to focus on a one-way outflow narrative,” wrote Henan Sekuritas in a publication on Friday (24/6/2026).

“Meanwhile, data on holdings of seven passive MSCI index-based ETFs with total assets under management (AUM) of 73.9 billion US dollars show non-uniform rotation patterns from February to mid-April 2026,” it continued.

This phenomenon is particularly evident in non-HSC stocks that are currently in a structural underweight position in some global ETFs.

This means these stocks have not yet been purchased according to their ideal weighting and have the potential to become accumulation targets during the rebalancing.

“That pattern indicates potential price dislocations in non-HSC stocks that are currently in a structural underweight position in one of the world’s largest global ETFs,” explained Henan Sekuritas.

Henan Sekuritas specifically highlighted two issuers, namely PT Barito Pacific Tbk (BRPT) and PT Chandra Asri Pacific Tbk (TPIA), which are deemed to fit this characteristic.

Both are not included in the HSC list, have adequate free float, and show underweight positions in ETF ownership structures.

“The discussion covers the separation between the mechanical dimension of the index and the fundamental dimension of the issuers, as well as the timeline of critical events up to the effective date of 1 June 2026,” said Henan Sekuritas.

The MSCI announcement confirms six main provisions applicable to all Indonesian constituents in the May 2026 SAIR cycle.