Indonesian stocks hit by MSCI downgrade warning, posting biggest drop in 28 years

MSCI Inc. warned that Indonesias emerging-market status is at risk, putting the nations stocks in danger of being cut from global indexes, fueling concerns over foreign outflows and triggering the worst selloff in almost three decades. The benchmark Jakarta Composite Index plunged at the open, triggering a 30-minute trading halt, and tumbled more than 11% intraday, the biggest one-day drop since January 1998. Fridays rout deepened the Indonesian stock markets year-to-date slump, cementing its position as the worlds worst-performing equity market. The rupiah also weakened toward a record low. In a statement, MSCI said the index provider has begun a consultation process that could result in a two-notch downgrade for Indonesian stocks: skipping the frontier-market classification and reclassifying the Southeast Asian nation as a standalone market, citing severe investability issues. MSCI expects to make a final decision by June next year unless clear evidence of substantial improvements in market governance emerges.