As Indonesia faces MSCI downgrade threat, officials vow reforms to ease fears

As the threat of a reclassification by MSCI that could relegate Indonesia to an investment hinterland looms, the country’s financial regulators and stock exchange officials have vowed to address systemic concerns, including removing stocks with concentrated ownership.

The global index provider announced on Friday it was launching a formal consultation to decide whether to downgrade Southeast Asia’s largest economy from “emerging market” to “stand-alone” status, similar to countries such as Argentina, Zimbabwe, Ukraine and Russia.

MSCI cited persistent concerns over Indonesia’s market dysfunction, including opaque ownership structures, highly concentrated shareholdings and coordinated trading practices. Its final decision is expected by June 30 next year.

On Monday, officials from the Indonesia Stock Exchange (IDX) held an online meeting with MSCI representatives, where they laid out measures to reform the country’s problematic stock market.