Core Viewpoint - The Indonesian stock market experienced its largest drop in over six months, primarily due to concerns regarding potential adjustments to the weight of Indonesian stocks in the MSCI index, as indicated by a report from MSCI [1][3]. Market Performance - On Monday, the Indonesian Composite Index fell significantly, with a maximum decline of 3.8%, while the MSCI Indonesia Index decreased by 2.52% [2]. - Major companies saw declines in their stock prices, including PT Barito Renewables Energy Tbk (BREN) down 14.99%, PT Bank Central Asia Tbk (BBCA) down 0.91%, and PT Dian Swastatika Sentosa Tbk (DSSA) down 12.12% [2]. MSCI Report Insights - The primary cause of the market drop was a consultation report from MSCI, which is considering changes to how the free float of Indonesian stocks is calculated [3]. - MSCI proposed using monthly shareholder registration data from the Indonesian Central Securities Depository (KSEI) to determine the free float of listed companies, although this plan is not finalized and feedback from market participants is being sought until December 31, 2025 [4]. Data Utilization and Methodology - The consideration to use KSEI data stems from its detailed classification of shareholders into corporate and individual categories, although KSEI data will not be directly used for calculating free float [5]. - MSCI is also exploring a more comprehensive approach to assess Indonesian stocks, which may involve excluding scrip-based shares from the free float calculation [6]. Potential Adjustments and Impact - As an alternative, MSCI is considering excluding scrip shareholders and corporate shareholders from the free float calculation. If the index is adjusted according to the new rules, the expected adjustment range is between 5% and 13%, which may require fund managers tracking the MSCI Indonesia Index to adjust their portfolio holdings by approximately 5% to 13% [7]. - There are currently five ETFs tracking the MSCI Indonesia Index, although specific sizes have not been disclosed [7][8]. MSCI Overview - MSCI is a global provider of indices and related financial products, widely referenced by investment professionals, including portfolio managers and financial media. As of December 31, 2024, assets under management based on MSCI indices are approximately $16.9 trillion, covering equity and multi-asset class funds [8].