MSCI Extends Review of Indonesia Market Reforms to June
MSCI extended its review of Indonesian stock market reforms until June to assess new transparency data. The move follows a warning that triggered a market rout.
Global index provider MSCI INC announced on Monday that it will extend its review of the stock market in Indonesia until June. This extension allows the firm to further evaluate regulatory reforms introduced by the Southeast Asian nation following a warning in January that sparked a significant sell-off by foreign investors.
The initial warning regarding a possible downgrade from emerging to frontier market status due to transparency concerns led to a 12% decline in Jakarta's stocks this year. This performance has positioned the local market as the worst-performing major index in Asia, with net foreign selling reaching approximately $2.3 billion.
While reviewing new data and regulatory measures, the index provider stated it would maintain a freeze on increasing foreign inclusion factors and the number of shares for Indonesian securities. Additionally, no new Indonesian stocks will be added to investable market indexes, and upward migrations across size segments remain suspended. Mohit Mirpuri, a fund manager at SGMC Capital based in Singapore, noted that the decision aligns with market expectations.
\"This reinforces MSCI’s measured, wait-and-see approach, engaging constructively with the reforms, but needing more time to assess implementation,\" said Mirpuri.
Jeffrey Hendrik, the acting CEO of the Indonesia Stock Exchange, confirmed on Tuesday that officials met with the index provider last week to discuss strengthening the capital market. Jakarta stocks fell 0.8% in early trading following the news.
\"We will also continue to engage with global investors to gather input on strengthening the capital market in the future,\" Hendrik said in a statement.
Since the January warning, Indonesian authorities have implemented several changes, including the disclosure of more granular shareholder data. Furthermore, the minimum free float for listed companies was doubled to 15% to enhance liquidity and curb price manipulation. The announcement follows a decision by FTSE Russell to maintain the country's status as a secondary emerging market without placing it on a watch list. Meanwhile, reporting on these developments involved contributors from Mexico and other regional hubs.
MSCI emphasized that it will not integrate the new disclosures into its calculations until the review is finished and market feedback is analyzed.
\"This approach is designed to limit index turnover and investability risks while allowing time for further evaluation of the recently announced reforms,\" MSCI said.
