JAKARTA — Indonesian stocks sank to their lowest level in six years on Monday, extending a record two-day rout set off by MSCI's proposal to strip the country of its emerging-market status and push it out of the global indexes that steer billions of dollars of passive investment.

The Jakarta Composite Index fell more than 5% after plunging 11.6% on Friday, its steepest one-day drop since January 1998, according to Reuters. Investing.com put Monday's decline at 5.1%, to 4,921.74 points, the weakest level since 2020.

The selloff matters well beyond Jakarta. MSCI's indexes are the benchmarks against which most emerging-market funds are measured, and removal would force index-tracking funds to sell Indonesian shares regardless of what they think of the companies. Goldman Sachs estimates that a full removal from MSCI's emerging-market indexes could trigger about $5.6 billion in passive outflows, equal to roughly 18 days of average trading volume in the affected stocks, CNBC reported.

The Indonesia Stock Exchange said the decision had caught it off guard. "The MSCI announcement was unexpected to us, causing a market panic," the exchange said in a statement ahead of a meeting with MSCI executives on Monday, Reuters reported. The bourse also halved its daily limit on price falls to 7% to slow the selling.

President Prabowo Subianto was expected to meet top financial officials on Monday afternoon to discuss the "current economic condition," two government sources told Reuters. The gathering was to include the Danantara sovereign wealth fund and the Financial System Stability Committee, which brings together the finance minister, the Bank Indonesia governor and the heads of the Financial Services Authority and the deposit insurance agency.

The rupiah weakened to 18,040 per dollar, close to the record low of 18,190 set in June. The yield on the 10-year government bond rose to 7.4% from 7.169% on Friday, traders told Reuters.

MSCI set off the rout late on Thursday, U.S. time, when it said it "considers Indonesia's continued classification as an Emerging Market no longer appropriate" and was "launching a consultation on a proposal to reclassify Indonesia as a Standalone Market." The standalone label sits outside MSCI's main groupings of developed, emerging and frontier markets and would place Indonesia alongside Jamaica and Panama, according to Euronews.

The index provider said investors had raised concerns about "ongoing opacity in shareholding structures" and coordinated trading that distorts prices, and that "sufficient progress has not been observed consistently across the Indonesian equity market," AFP reported. A downgrade only as far as frontier status, MSCI said, "would not properly recognise the depth of the market problems."

MSCI will take feedback until April 30, 2027, and expects to announce its decision on or before June 30, 2027, according to Investing.com.

MSCI first flagged concerns over market manipulation and ownership transparency in January, when it threatened a downgrade to frontier status, Reuters reported. Authorities in Jakarta said in April they had completed reforms, including publishing shareholdings above 1% and raising the minimum free float, in the hope of heading that off.

Indonesia was already the region's worst-performing stock market this year, with the benchmark down nearly 40% before Friday's plunge, according to Reuters. The MSCI Indonesia Index had lost 47% for the year as of Friday, Goldman said. Foreign investors have sold a net $4.88 billion of Indonesian stocks in 2026, on course for the largest annual outflow in at least 16 years, Reuters reported.

Goldman Sachs strategists wrote that "the burden of proof has shifted" and that avoiding reclassification "will require clear evidence that the announced reforms" have been carried out, according to Reuters. The bank estimated a further $2.7 billion could be at risk if FTSE Russell follows MSCI's lead, and that active funds benchmarked to the two providers hold more than $8 billion in Indonesian equities, though any selling by those managers would be discretionary. Goldman kept its underweight rating on Indonesian stocks, CNBC reported.

Rain Lin, a sovereign analyst at S&P Global Ratings, said the warning would likely bring further outflows but not on a scale that would materially raise Indonesia's financing costs, Reuters reported. "More concerning is the potential damage to investor confidence," Lin said.

On Friday, authorities announced sanctions over alleged manipulation in the shares of three companies, with fines totalling 2.1 trillion rupiah, or about $116 million, according to Reuters.

Friderica Widyasari Dewi, chair of the board of commissioners at the Financial Services Authority, known as OJK, said the agency respected MSCI's independence and took its findings seriously. "We believe the domestic capital market remains prospective and attractive," she said, according to the state news agency Antara, pointing to economic fundamentals, a growing investor base and low valuations.

Angus Mackintosh, an ASEAN specialist at Aletheia Capital in Singapore, told Reuters the fines were a positive move but added that "there needs to be concerted action to stamp the authority of the OJK."

Bank Indonesia, which raised interest rates several times earlier this year to defend the rupiah, said it would act to keep the currency stable. Erwin Gunawan Hutapea, the central bank's head of monetary management, said "capital outflows from domestic portfolio assets are expected to continue," AFP reported.

The central bank's policy committee meets on Wednesday. It is widely expected to hold rates, though some analysts have raised the possibility of a hike to stem the bond selloff, Reuters reported.