MSCI acknowledges Indonesia's capital market reforms, maintains Emerging Market status

Global index provider MSCI has acknowledged the transparency reforms implemented by Indonesia's capital market authorities. Despite these efforts, Indonesia's Emerging Market status remains unchanged and will be closely monitored until November 2026.

The acknowledged reforms encompass significant initiatives announced by the Financial Services Authority (OJK), the Indonesia Stock Exchange (IDX), and the Indonesia Central Securities Depository (KSEI). These include improvements in disclosing shareholders with ownership above 1 percent, more detailed investor classifications, the introduction of a High Shareholders Concentration (HSC) framework, and a roadmap to increase minimum free float requirements to 15 percent.

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Although these announcements are a step in the right direction, what is important for international institutional investors is the consistent implementation and sustained effect of these measures across the market.

MSCI stated that while these announcements are positive steps, consistent implementation and sustained effects are crucial for international institutional investors. The index provider will continue to assess the scope, consistency, and effectiveness of Indonesia's capital market in the context of free float and broader investment eligibility. This assessment will continue until the MSCI Index Review in November 2026.

MSCI issued a warning that if substantial progress is not observed by the November 2026 review, it will consider various options for Indonesia's market treatment, potentially including reclassification from Emerging Market to Frontier Markets. This strict oversight stems from deep concerns expressed by market participants regarding investment eligibility issues related to transparency, shareholding structures, and coordinated trading behavior.

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If adequate progress is not seen by the time of the MSCI November 2026 Index Review, MSCI will consider various options for the appropriate treatment of the Indonesian market, potentially including consultation on reclassifying Indonesia from Emerging Market to Frontier Markets.