Indonesia has spent decades establishing itself as one of the world’s most important emerging markets. Now the country — Southeast Asia’s largest economy, with a gross domestic product of about $1.5 trillion — risks losing that standing, potentially jeopardizing billions of dollars in foreign investment.
In January, index provider MSCI Inc. warned that it might downgrade Indonesia’s equity market from “emerging” to “frontier.” Those classifications help determine how global investors allocate trillions of dollars across markets, influencing how easily governments and companies can raise capital. The warning crystallized long-standing concerns over ownership concentration and market integrity in the country’s equities, triggering one of the worst selloffs in the nation’s stock market.