Jakarta, Jan 30, 2026 (AFP)
Indonesian stocks plunged this week after global index compiler MSCI threatened a downgrade over transparency, sparking a sell-off among investors already nervous about the country's political climate.
The Jakarta Composite Index plummeted around eight percent Wednesday and as much as 10 percent Thursday, its worst performance since 1998 during the Asian financial crisis.
The market recovered slightly Friday after regulators pledged reforms.
- What is MSCI ? -
A New York-based financial company, MSCI produces international indexes used by investors as a benchmark to balance their portfolios.
It has a significant impact on investment decisions through its flagship emerging markets index, which contains 1,200 companies with a market capitalisation more than $10 trillion.
Fund managers worldwide keep a close eye on what countries are included or excluded in MSCI 's indexes as that can trigger adjustments to their portfolios.
- What happened in Jakarta? -
The firm said in a statement that investors had "highlighted that fundamental investability issues persist due to ongoing opacity in shareholding structures and concerns about possible coordinated trading behaviour that undermines proper price formation".
"More granular and reliable information on shareholding structures, possibly including high shareholding concentration monitoring, is required," it wrote.
Observers have long complained about a lack of liquidity in the shares of major corporations in Southeast Asia's biggest economy.
These are typically controlled by a small number of individuals, exposing them to orchestrated price swings rather than real economic conditions.
- What's at stake? -
MSCI said it will temporarily freeze certain changes for Indonesian stocks in its index reviews.
Firms that suffered the biggest losses were this slated to be added to MSCI indexes, including PT Bumi Resources, one of the country's largest mining firms and real estate giant PT Pantai Indah Kapuk Dua.
Jakarta has until May to make progress on transparency or MSCI could reduce the weighting of Indonesian companies in its emerging markets index.
It could even downgrade Jakarta from its current "emerging market" status to that of "frontier market", considered higher-risk.
- Why the plunge? -
"This is market panic, even though MSCI hasn't decided anything yet," said Hans Kwee, a stock analyst at PasarDana.
He added that a reduced weighting would push foreign investors to sell Indonesian stocks while a downgrade would lead to a "sizeable outflow".
Goldman Sachs downgraded Indonesian stocks on Thursday, estimating outflows exceeding $13 billion in an extreme scenario. UBS and HSBC followed suit.
"What MSCI is asking for is also good for the market -- good for market transparency -- and it will certainly be pursued," Kwee said but warned investors remained cautious.
- What is Jakarta's reaction? -
Exchange operator IDX said it "will continue its coordination with MSCI ".
CEO Iman Rachman resigned on Friday, citing his "responsibility for what happened over the past two days".
Indonesia's financial regulator (OJK) said it plans to double to 15 percent the minimum free float, which refers to the amount of shares made available to the public.
- What is the economic climate? -
The episode has raised concerns among investors about President Prabowo Subianto economic policy.
Their confidence was already shaken by last year's dismissal of respected finance minister Sri Mulyani Indrawati.
Prabowo's growing influence over the central bank, where he has just appointed his nephew as deputy governor, has also caused concern.
"Concerns about the direction of policymaking in the country have reared their head again since the start of this year," said Jason Tuvey, an analyst at Capital Economics.
"A widening budget deficit and the installation of... Prabowo's nephew as deputy governor at the central bank have added to signs that the president is shifting policy in a more populist and interventionist direction," he added.
MSCI 's announcement "accelerates the decision to exit the market for anyone who was on the fence", said Aberdeen fund manager Xin-Yao Ng, according to Bloomberg.
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Sumber : AFP