On October 16, MSCI announced a proposal to reclassify Indonesia from an emerging market to a standalone market status due to concerns over market quality, opaque shareholder structures, and suspected manipulation. This decision follows a freeze on increasing Indonesian stock weights since January and a warning issued in June that reclassification would be considered if reforms were not sufficiently advanced by the November review. The announcement triggered immediate market turmoil, with the Jakarta Composite Index falling more than 10% in a single day—its largest decline since the 1998 Asian financial crisis—and the rupiah hitting near all-time lows. MSCI stated that unless clear evidence of significant improvements in market governance and functionality is confirmed during the feedback process, they intend to proceed with the reclassification, which would end Indonesia's 37-year status as an emerging market. MSCI's judgment has become progressively stricter, citing a lack of effective enforcement despite Indonesia's path toward expanding disclosure and raising minimum free float ratios. The index provider noted that without trustworthy data on actual free float and market prices, the indices themselves become unreliable, potentially cutting off Indonesian equities from global capital flows managed by major institutional investors. In response to the volatility, Indonesian regulators announced sanctions against three stocks suspected of manipulation, while Bank Indonesia intervened in currency markets. Economists expect the central bank's policy rate to remain steady as it attempts to prevent capital outflows from spreading to the bond market, highlighting the severe indirect impact of MSCI's classification decision on the domestic economy.