Indonesia's stock market faces fresh pressure as MSCI Inc. raised additional concerns about market practices, threatening a potential reclassification that could trigger significant capital outflows. The Jakarta Composite Index has already slumped 29% this year, making it one of the world's worst-performing major markets.

MSCI highlighted limited transparency in shareholding structures and indications of coordinated trading that distort proper pricing mechanisms. The index provider specifically downgraded Indonesia's information flow criterion to negative, citing material limitations on international investors' ability to assess true free float and rely on market prices for portfolio decisions.

A potential downgrade from emerging-market to frontier-market status would represent a dramatic reversal for a market previously favored for its steady economic growth and political stability. Analysts warn such a reclassification could accelerate outflows from Indonesia's already struggling equity market, compounding the challenges facing Southeast Asia's largest economy.

The decision, expected next week, puts Indonesia's market standing at a critical juncture as institutional investors reassess their exposure to emerging markets amid growing governance concerns.