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MSCI Inc. again decided to postpone its review on Indonesian equities, saying it needs more time to see whether recently announced transparency reforms are effective.\u00a0<\/p>\n
The index compiler said the country\u2019s moves regarding enhanced disclosures, more granular investor classification and a roadmap to raise the minimum free-float requirement to 15% are a step in the right direction. Still, what matters for global investors is the consistent implementation and sustained effect of such measures in the market, it said in a Tuesday\u00a0release.\u00a0<\/p>\n
\u201cShould sufficient progress not be evident by the time of the November 2026 MSCI index review, MSCI will consider a range of options for the appropriate treatment for the Indonesia market, potentially including a consultation on the reclassification of Indonesia from emerging markets to frontier markets,\u201d according to the statement.<\/p>\n
The move is likely to deepen investor unease that\u2019s built over months after MSCI in January flagged a potential downgrade to frontier status due to investability concerns and the limited number of shares available for public trading. The warning, which had triggered a market rout, prompted authorities to introduce a series of reforms.<\/p>\n
\u201cThe market retains emerging market status, but with a warning label attached,\u201d said Mohit Mirpuri, a partner at SGMC Capital Pte in Singapore. \u201cThe burden is now on regulators to demonstrate credible progress over the coming months.\u201d<\/p>\n
Tuesday\u2019s update, already\u00a0delayed\u00a0from May, followed last week\u2019s move by the index compiler to revise Indonesia\u2019s assessment on information flow to negative in its annual accessibility review due to limited transparency in shareholding structures, coordinated trading behavior that undermines price formation and a lack of corporate disclosure in English.<\/p>\n
Uncertainty ahead of the review had pushed many market participants to the sidelines, with investors citing the overhang from potential outflows. Coupled with concerns over policy direction and the fallout from the Iran war, the benchmark Jakarta Composite Index had tumbled to become the world\u2019s worst-performing major gauge this year. The gauge was up as much as 1.2% in the morning before paring to 0.6% as of 9:30 a.m. local time.<\/p>\n
\u201cThe macro is clearly quite challenged,\u201d said Yi Ping Liao, a fund manager at Franklin Templeton. \u201cI still think that there are things that need to be worked out, and until then, I don\u2019t think that there\u2019s a very strong case to be in Indonesia.\u201d<\/p>\n
Regulators have introduced a series of reforms in recent months, including raising minimum float. The Indonesia Stock Exchange took the unusual step of identifying firms with high shareholder concentration\u2014an issue that underpinned MSCI\u2019s decision to\u00a0remove\u00a0some of these stocks from its indexes in May. The\u00a0installation\u00a0of capital markets veteran Jeffrey Hendrik as chief executive officer of the stock exchange recently has also steadied some nerves.<\/p>\n
According to Hasan Fawzi, head of capital market supervision at the Financial Services Authority, the decision \u201cprovides momentum to continue, strengthen, and accelerate the capital market reform agenda\u201d that\u2019s been initiated since the start of the year.\u00a0<\/p>\n
An ultimate call to keep Indonesia\u2019s emerging-market status could curb foreign outflows and ease pressure on the rupiah. The currency has hit successive lows, weakening more than 6% against the US dollar this year and ranking among the worst performers in its peer group. Overseas investors have also sold $4 billion of equities, dragging the benchmark index down about 30%.<\/p>\n
Such an outcome could also provide some relief to President Prabowo Subianto, whose populist agenda and push for tighter state control have unsettled investors. Fears of greater\u00a0state intervention\u00a0in commodity exports have driven funds to the sidelines, while the\u00a0abrupt firing\u00a0of the head of Indonesia\u2019s nutrition agency\u2014central to Prabowo\u2019s free meals program\u2014and a subsequent corruption probe have added to unease.<\/p>\n
\u201cI think it\u2019s positive that MSCI acknowledged the recent reforms,\u201d said Felix Darmawan, an analyst at PT BCA Sekuritas. \u201cThe focus now shifts from announcing policies to executing them. If implementation is convincing over the next year, the reclassification risk could gradually fade.\u201d<\/p>\n
Investors are now awaiting FTSE Russell\u2019s review. The index provider said last month it would delay re-ranking Indonesia, including changes to free float and stock additions, until at least its September review to allow for further monitoring.<\/p>\n<\/div>\n
#MSCI #delays #Indonesias #market #status #review #November<\/p>\n","protected":false},"excerpt":{"rendered":"
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