KUALA LUMPUR (Jan 28): MSCI Inc’s concerns about the investability of Indonesian stocks add to the case for net foreign inflows into the Malaysian bourse in 2026, according to market watchers.

Fund managers and analysts see outflows from Indonesia’s stock market leading to positive spillover to the local bourse.

Indonesia’s Jakarta Composite Index fell 7.4% in its biggest one-day drop in over nine months after index compiler MSCI Inc flagged fundamental investability issues linked to free-float — the number of shares available for trading. This led it to immediately pause some index changes, including additions, until regulators address concerns over the tightly held ownership of listed firms. 

If transparency issues aren’t addressed, Indonesia could see a reduced weight in the MSCI Emerging Markets Index or even a downgrade to frontier-market status, which may trigger selling by funds that track the index. 

Together with expectations for economic and corporate earnings’ growth, the Malaysian equity market may turn to net foreign inflows in 2026, ending its spell of outflows, Areca Capital Sdn Bhd CEO Danny Wong told The Edge.

Malaysia logged a hefty net foreign outflow of RM22.3 billion in 2025. A combination of underperformance last year, expected earnings growth and valuations below historical levels has led analysts to forecast foreign inflows this year.

Foreign investors have been net buyers for three consecutive weeks. Cumulative net foreign inflows stood at RM1.47 billion as at Jan 27, 2026.

Meanwhile, Malacca Securities head of research Loui Low underlined that continued gains made by the ringgit point to more foreign investors looking to enter the market. “Hence, they could be positioning for further growth,” he added.  

The FBM KLCI has started the year hot.

The benchmark index has gained over 4% in less than a month — already exceeding 2025’s gain of 2.3%. It closed down 0.83% at 1,756.49 on Wednesday.

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Indonesian stocks plunge 7% after MSCI warning on investability