lobal index compiler MSCI has decided to maintain Indonesia in the emerging market category but says a downgrade remains possible as it continues to assess the effectiveness of domestic stock market reforms.
In its June review, MSCI acknowledged the transparency reforms introduced by the Financial Services Authority (OJK), the Indonesia Stock Exchange (IDX) and the Indonesian Central Securities Depository (KSEI).
The measures include enhanced disclosure of shareholders that own more than 1 percent of a listed company rather than 5 percent previously, a more granular investor classification, a high shareholding concentration (HSC) framework and a road map to raise the minimum free float to 15 percent for IDX stocks.
“While these announcements represent a step in the right direction, what matters for international institutional investors is the consistent implementation and sustained effect of these measures across the market,” MSCI stated in the review, published on Tuesday in the United States.
Regarding the reforms, the New York-based firm also said it would “continue to assess their scope, consistency and sustained effectiveness in the context of free float determination and broader investability assessments”.
“Should sufficient progress not be evident by the time of the November 2026 MSCI index review”, the firm said it would consider a range of options, “potentially including a consultation on the reclassification of Indonesia from emerging markets to frontier markets”.
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Investors have been unsettled by the potential downgrade since MSCI first issued its transparency warning on Indonesian equities in January, which triggered a massive sell-off, two trading halts and resignations at both the IDX and the OJK.