The fund has bought shares it deems attractive and will continue investing while valuations remain favourable
[JAKARTA] Indonesia’s sovereign wealth fund Danantara is ready to deploy more capital into domestic equities after an MSCI warning triggered a market sell-off, with the fund seeing buying opportunities in companies whose share prices have fallen despite strong fundamentals.
The agency has already bought shares in companies it considers attractive and will continue investing as long as valuations remain favourable, chief investment officer Pandu Sjahrir said at a press briefing on Thursday (Oct 22).
Danantara is prepared to continue buying shares when prices are attractive and companies have strong growth potential, he said, without disclosing the amount it has invested.
“We are always profit-oriented. We see that from the risk-reward perspective, it’s looking good now,” Pandu said, adding that several companies, including some state-controlled firms, still have strong fundamentals.
Pahala Mansury, Danantara’s managing director for global relations and communications, said the fund does not select individual stocks directly but instead works with investment managers. The fund had previously set aside about US$1 billion for investments in the stock market through the end of 2026.
Indonesian stocks bounced back 1.5 per cent on Thursday, offering some relief after MSCI’s warning set off a historic sell-off last week.
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Danantara oversees about US$900 billion in state assets across roughly 1,000 companies, with dividends from its holdings forming part of its strategy to generate returns and fund further investments.
The move comes as Indonesian equities face renewed pressure after MSCI warned on Oct 15 that it could reclassify the country from an emerging market to a standalone market.
The review reflects concerns over opaque share ownership, suspected trading irregularities and gaps in market oversight.
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The rout wiped about US$82 billion off the market’s value over two days, marking the steepest such decline on record, before shares staged a partial recovery on Oct 20.
The sell-off adds to heavy foreign outflows, with overseas investors having sold a net 84.8 trillion rupiah (US$4.7 billion) of Indonesian shares as at Oct 15, before MSCI’s warning.
Indonesia’s stock market has become one of the world’s worst performers this year. The Jakarta Composite Index has tumbled about 40 per cent in 2026, leaving it trailing regional peers including Singapore, Malaysia and the Philippines.
The Indonesia Stock Exchange has introduced tighter trading curbs, including limits on how far share prices can fall in a single session, as regulators seek to contain selling pressure and stem investor outflows following the market sell-off.
As investors pull back from Indonesian equities, companies, including state-owned firms, are looking to buybacks to support demand for their shares.
State-owned lenders Bank Mandiri and Bank Negara Indonesia have set aside 1.17 trillion rupiah and 627 billion rupiah, respectively, for share repurchases.
MSCI has said it is reviewing concerns over the transparency of shareholding data and possible coordinated trading practices, with a final decision on Indonesia’s classification expected by the end of June 2027.
A move to standalone status could reduce the appeal of Indonesian equities to global investors tracking emerging-market benchmarks, potentially prompting some funds to reassess their exposure to the country.
If the proposed downgrade proceeds, Indonesia would become the first market in Asia-Pacific to be classified as a standalone market by MSCI, joining a group that includes Argentina, Nigeria, Ukraine, Zimbabwe and Lebanon.
The move could also trigger a significant exodus of capital. Goldman Sachs estimated that a full removal of Indonesia from MSCI’s indices could prompt as much as US$5.6 billion in passive outflows.
President Prabowo Subianto, however, has said that Indonesia would not be intimidated by the index provider.
Speaking at a Cabinet meeting in Jakarta on Wednesday, Prabowo accused MSCI of trying to frighten the country after it raised the possibility of stripping Indonesia of its emerging-market status.
“I’ll just say this to MSCI: Indonesia is not afraid of anyone and will not flinch,” he said. “We have strength, we have courage, we are willing to make sacrifices, and we do not know surrender.”
Prabowo’s comments came as Indonesian financial authorities face pressure to address concerns over market transparency and governance raised by MSCI.
Last week, Indonesia’s Financial Services Authority imposed fines totalling 2.1 trillion rupiah on parties involved in share manipulation and violations of initial public offering regulations linked to companies associated with conglomerates.
Philip Wee, senior foreign exchange strategist at DBS Group Research, said Prabowo’s response should be viewed as an effort to reassure domestic audiences. Jakarta was still working to address investor concerns over equity-market governance and the risk of a downgrade to standalone status by June 2027, he said.
“It is important to distinguish between political rhetoric and policy efforts,” Wee said.