MSCI said on Oct 16 that it was considering downgrading Indonesia to standalone from emerging-market status, citing persistent concerns about the investability and governance of the country’s equity market.
The index provider launched a consultation on the proposed downgrade after issuing a warning in June that Indonesia could face reclassification if concerns about market accessibility persisted.
MSCI said investors had raised concerns about opaque ownership structures, concentrated shareholdings and suspected coordinated trading, which it said undermined the market’s investability.
Indonesian authorities have since announced reforms, including enhanced shareholder disclosure requirements and a roadmap for a minimum free-float requirement of 15%. However, MSCI said market participants had yet to see consistent evidence that the measures had materially improved market functioning.
“Accordingly, MSCI considers Indonesia’s continued classification as an Emerging Market no longer appropriate and is launching a consultation on a proposal to reclassify Indonesia as a Standalone Market,” MSCI said.
The consultation will run until April 30, 2027, with a final decision due by June 30.
MSCI said investor feedback suggested a move to frontier-market status would not adequately reflect Indonesia’s market-accessibility issues. It expects to proceed with the proposed standalone classification unless there is clear evidence of material improvements in governance and market functioning.
MSCI will also maintain a freeze on certain index-related changes for Indonesian securities until further notice, including additions to the MSCI Indonesia Investable Market Index and increases in foreign inclusion factors or shares outstanding resulting from index reviews or corporate events.
Indonesia has faced a series of setbacks in 2026, with Moody’s and Fitch cutting their sovereign rating outlooks to negative, citing reduced policymaking credibility.
The benchmark Jakarta stock index has fallen more than 30% in 2026, making it the worst-performing equity market in emerging Asia. REUTERS
