MSCI Inc. signaled on Thursday that it expects to remove Indonesia from its global indexes barring major improvements in market governance, sending local stocks tumbling by the most since the 1998 Asian Financial Crisis. The move would strip Indonesia of its emerging market status and relegate it to a category below even frontier markets like Bangladesh — the first double downgrade since Russia was cut in 2022.
After months of urging Indonesian officials in private and public to address investor concerns about market manipulation and poor disclosure, MSCI said its patience had run out. The index compiler had been privately signaling to officials in recent weeks that the market's problems hadn't been fixed, according to people familiar with the matter.
The question now hanging over the $565 billion market is whether this week's rout focuses minds in Jakarta enough to allay MSCI's concerns in time for its final decision in June. On Friday, the country's market regulator imposed hefty fines on groups linked to two prominent listed companies for alleged market manipulation.
President Prabowo Subianto was due Friday to discuss MSCI with top officials, including key ministers and the management of Danantara. MSCI indicated that bad actors behind activities such as front-running and coordinated trading must face proper surveillance tools and strong deterrence.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing