‘Alternative, stable markets’: Johor eyes investment opportunities as Indonesia faces possible MSCI downgrade

MALAYSIA: Malaysia and Johor stand to benefit from investment flows redirected away from Indonesia following Morgan Stanley Capital International’s (MSCI) proposal to reclassify Indonesia from an Emerging Market to a Standalone Market, according to Johor Investment, Trade, Consumer Affairs and Human Resources Committee Chairman Lee Ting Han.

Speaking to reporters at the Falcon Data Centre Project Completion Appreciation Ceremony at Forest City Marina Hotel, Lee said Malaysia’s neutral international positioning makes it a credible alternative destination for foreign funds reassessing their regional exposure.

“When foreign funds are withdrawn from a market following a downgrade, they typically seek alternative, stable markets. Malaysia, particularly Johor, holds a neutral and balanced position between East and West. This makes it a potential destination for strategic investments, as well as long-term physical development and infrastructure projects,” he said, as quoted by Invest Johor, citing Utusan Malaysia.

Lee noted that an MSCI downgrade of Indonesia is not expected to have a significant direct negative impact on Johor or Malaysia’s markets, as MSCI focuses on capital markets and the components of international indices rather than the broader physical investment environment.

MSCI recently announced it was considering reclassifying Indonesia from Emerging Market to Standalone Market status, which is unfortunately a significant downgrade that would remove Indonesia from key global indices tracked by passive and index-linked funds.

Indonesia’s benchmark Jakarta Stock Exchange Composite Index fell more than 5% in early trading, reaching its lowest level in six years following a sharp 11.6% decline the previous Friday. The Indonesian rupiah also weakened following MSCI’s warning.

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