The chief executive of the Indonesia Stock Exchange, Iman Rachman, has resigned following a caution from MSCI regarding a possible downgrade of the country’s stock market that triggered a steep decline over two sessions totaling 8.4%, as investors weighed the uncertainties around regulatory changes needed to align with MSCI standards.
However, trading on Friday brought some respite, as the benchmark index rebounded by approximately 1% during morning trade. The modest recovery came as investors assessed the prospects for improved compliance efforts and stabilization in market oversight, though concerns over longer-term regulatory risks persist.
Earlier this week, MSCI stated it completed its review of the free float levels among Indonesian-listed companies and has decided to freeze, for now, several index-related changes. The decision will affect the February 2026 index review and any corporate actions that would normally trigger additions or adjustments.
According to MSCI’s communication, the firm will not permit any increases to Foreign Inclusion Factors (FIF) or the number of shares used for index calculations. No new Indonesian stocks will be added to MSCI’s Investable Market Indexes, and companies will not be allowed to move up from smaller-cap segments to the broader standard indexes.
This interim policy reflects MSCI’s concerns about the low free float in a significant portion of Indonesia’s equity market. MSCI cited the need to address investability and high index turnover risks while awaiting steps by Indonesian authorities to improve transparency.
If the market regulator cannot deliver substantial improvements by May 2026, MSCI signaled a willingness to re-evaluate Indonesia’s position in its indices. This could include lowering the country’s weighting within MSCI’s Emerging Markets benchmarks or even reclassifying Indonesia from an Emerging to a Frontier market status, pending market feedback.
