INDONESIAN stocks slumped 7% on Wednesday after index provider MSCI flagged investability risk citing a lack of transparency in ownership structure and free float data, and raising the possibility of downgrading Indonesian equity markets.
MSCI said it would reassess Indonesian market accessibility for global investors should there be no meaningful improvement in transparency by May. Reassessment could lead to a lower weighting for Indonesian stocks in MSCI's emerging-market indexes or even a downgrade to frontier-market status.
It also flagged investor "concerns about possible coordinated trading behaviour that undermines proper price formation". In the meantime, MSCI said it would not make any Indonesia-related changes to its indexes.
Indonesia Stock Exchange (IDX), the Securities Depository and Settlement Institution (KSEI) and financial regulator OJK were discussing the matter with MSCI, IDX told reporters.
"Previously, we have increased transparency by publishing free float data announcements on the IDX website," said IDX Corporate Secretary Kautsar Primadi Nurahmad.
"However, if MSCI feels that this is not sufficient, we will continue discussions on data transparency in accordance with MSCI's proposal to reach an agreement."
KSEI and OJK did not immediately respond to requests for comment.
MSCI's indexes serve as share price-performance benchmarks.
The New York-headquartered company said that, with regards to Indonesia, it will immediately halt any additions to its indexes and freeze increases to its estimates on the number of shares available for purchase by international investors to "mitigate index turnover and investability risks".
"We believe this could put Indonesia under negative sentiment if MSCI decides to reduce Indonesia's weighting in the MSCI Emerging Markets (EM) index," said William Simadiputra, head of research Indonesia at Singaporean lender DBS.
"However, we think the downside risk will likely be limited due to persistent foreign outflows since 2025."
The major Southeast Asian equity market is already plagued by foreign outflows amid a weak currency and concern over a widening fiscal deficit and central bank autonomy.
Overseas investors sold 13.96 trillion rupiah ($834 million) worth of shares in 2025, the worst year of outflow since 2020, with the sell-off continuing in January, LSEG data showed.
Still, Indonesia's benchmark stock price index surged more than 20% in 2025 and set records several times during the year, making it one of the region's top-performing markets.
The benchmark Jakarta Composite Index tumbled as much as 7.9% on Wednesday to its weakest since early November. It was last trading about 7% lower around noon.
($1 = 16,730.0000 rupiah) - Reuters
