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🇮🇩 Indonesia /Economy & Trade

Indonesia's Stock Exchange Faces 27% Risk of MSCI Downgrade; Experts Cite Lower Probability

From Tempo · () Indonesian

Translated from Indonesian, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • Indonesia's stock exchange faces a 27% risk of being downgraded by MSCI from emerging to frontier market status.
  • Managing Director Tae Yong Shim believes the actual probability is much lower, potentially less than 10 percent.
  • MSCI has set a November 2026 deadline for further decisions after maintaining Indonesia's status in June 2026.
  • Efforts are underway to address MSCI's concerns regarding transparency in stock ownership and free float requirements.

Indonesia's stock exchange is facing a potential downgrade by global index provider Morgan Stanley Capital International (MSCI), with one assessment suggesting a 27% risk of being reclassified from an emerging market to a frontier market. However, experts believe the actual likelihood is significantly lower.

So, our chances are only 27 percent. In my opinion, the likelihood is very low

— Tae Yong ShimExpressing his assessment of the risk of MSCI downgrading Indonesia's stock exchange status.

Tae Yong Shim, Managing Director of PT Samuel Tumbuh Bersama, stated that while the assessment exists, "our chances are only 27 percent. In my opinion, the likelihood is very low." He further elaborated that the probability of Indonesia being downgraded could be even less, estimating it at 9 percent. Shim expressed confidence that the issues related to MSCI's assessment have been "well handled."

MSCI had previously decided to maintain Indonesia's emerging market status following its Market Classification Review on June 24, 2026. However, the global index provider has provided a deadline of November 2026 for further evaluation before making definitive decisions. MSCI has scrutinized the transparency of Indonesian stock ownership, leading to a temporary freeze in its assessment of Indonesian stock indexes.

I think the probability of Indonesia being downgraded to frontier market status is less than 10 percent, precisely 9 percent, and the issue related to MSCI has been well handled

— Tae Yong ShimProviding his personal, lower estimate of the downgrade risk and confidence in handling the issue.

Shim argued that MSCI's assessment has been overly harsh. He pointed to reforms initiated by the Indonesian government and the Self Regulatory Organization (SRO) to address concerns. These include new provisions for disclosing stock ownership exceeding 1 percent and establishing a minimum free float rule of 15 percent. Shim, however, suggested that this 15 percent minimum might be too high, drawing a comparison to SpaceX, which has a free float of only 3 percent. The Financial Services Authority (OJK) has pledged to strengthen capital market reforms in response to the MSCI review, with Hasan Fawzi of OJK emphasizing ongoing communication with global index providers and investors about Indonesia's market potential.

Its free float is only 3 percent. Will Elon Musk's SpaceX be listed in Indonesia? It's not possible, right? Because our minimum is 15 percent

— Tae Yong ShimQuestioning the high minimum free float requirement by comparing it to SpaceX.
DistantNews Editorial

Originally published by Tempo in Indonesian. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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