SINGAPORE/JAKARTA – Indonesian stocks rose on Oct 20 as the authorities in Jakarta introduced measures to restrict selling after a record two-day US$82 billion (S$104.9 billion) rout sparked by index provider MSCI’s warning of possible removal from its global indexes.
Jakarta’s benchmark index rose 3% on Oct 20, after hitting a six-year low in the previous session as the world’s worst-performing stock market this year dropped 14.8% over Oct 16 and Oct 19.
MSCI on Oct 16 said it was considering shifting Indonesia to “standalone” instead of “emerging markets” status, a more-severe-than-expected downgrade that shocked investors and officials.
To slow the heavy selloff on the market, which is down about 40% in 2026, the stock exchange this week halved the daily down limit on stock prices to 7% from 15%, while setting a 1 rupiah down limit on shares priced at 14 rupiah or less.
The move from the index provider has weighed on the rupiah as well, which strengthened slightly to 18,010 per US dollar on Oct 20 but remained close to the record low of 18,190 hit in June.
Jakarta authorities met with the index provider on Oct 19 to seek an explanation about its latest warning, which stemmed from concerns that Indonesia had yet to improve ownership transparency or clamp down on coordinated trading.
Also on Oct 19, Indonesian President Prabowo Subianto held talks with finance chiefs, including the head of the Financial Services Authority (OJK), the finance minister and the central bank governor.
OJK chief Friderica Widyasari Dewi said the regulator would continue to advance Indonesia’s capital market reforms, particularly regarding transparency, liquidity, and law enforcement against various forms of violations.
“A particularly important special message is how we must continuously enforce regulations against those who have committed violations related to coordinated trading and other similar practices,” Friderica said after the meeting.
The regulator on Oct 16 unveiled sanctions against those linked to alleged trading manipulation in shares of three firms, with the fines totalling 2.1 trillion rupiah (S$150 million).
In another step to address MSCI’s concerns, the Indonesia Stock Exchange (IDX) on Oct 19 said it would exclude from its benchmark index any stocks with a high concentration of ownership by the same person or entity.
“We will continue to carry out initiatives aimed at fostering greater transparency, a more credible market, and better governance,” IDX President Director Jeffrey Hendrik said following the meeting with MSCI.
George Xu, a director in Fitch Ratings’ sovereigns team, said the latest concerns and substantial market selloff reinforced the risks the rating agency identified when it revised the outlook on Indonesia to negative in March.
“From sovereign rating perspective, we do not anticipate the consultation announcement itself to have material immediate credit implications,” he said, but said external pressure could raise the government’s borrowing costs and erode external buffers. REUTERS
