Indonesian leader rejects market downgrade warning after stock market sell-off

JAKARTA, Indonesia (AP) — Indonesian President Prabowo Subianto rejected a warning from Morgan Stanley Capital International that could lead to the country's stock market being downgraded, saying his country would not be pressured by external parties.

Prabowo delivered a fiery speech at a gathering of his Cabinet on Wednesday, accusing the New York-based global index provider of attempting to pressure Indonesia after it said last week it was considering downgrading the country’s equity market as a “standalone” market.

“Our country continues to face all sorts of disturbances, including the MSCI. They are trying to intimidate us,” Prabowo told his Cabinet in a speech broadcast on the government’s official YouTube channel.

“I simply want to tell MSCI: the Indonesian nation fears no one and will never back down,” Prabowo said. "We have the strength, the courage and we are willing to make sacrifices, and we refuse to surrender."

MSCI said on Oct. 15 it opened a consultation on a proposal to downgrade Indonesia’s market status. It said it was weighing ejecting Indonesia from “emerging” status and into the “standalone” status, which could cause multi-billion-dollar capital outflows.

The index provider said its concerns center on coordinated trading practices in Indonesia’s stock market and whether authorities have taken sufficient steps to address them. It said its assessments are based on transparent and rules-based methodologies.

The warning has rattled investors and contributed to a sharp sell-off in Indonesian stocks over the past two trading sessions. A downgrade could reduce Indonesia’s attractiveness to international investors and potentially prompt capital outflows from funds that track emerging market indexes.

“MSCI will continue to monitor developments in the Indonesian market and engage with market participants and authorities,” the company said in a statement.

A government spokesperson, Syahganda Nainggolan, said Thursday that Prabowo’s remarks were not intended as a challenge to MSCI but as an invitation to dialogue, provided it takes place without pressure or coercion.

“The president highly values constructive engagement and dialogue with rating institutions such as MSCI,” Nainggolan said.

Prabowo , a former army special forces commander who took office in 2024, has frequently employed nationalist rhetoric and has often warned of foreign efforts to influence or undermine Indonesia. During Wednesday’s remarks, he again referred to outside interference, although he did not provide details.

Former Trade Minister Muhammad Lutfi alleged on Tuesday that Singapore state investment companies Temasek Holdings and GIC had played a role in pressuring MSCI over Indonesia’s market status.

Both firms rejected the claim.