OJK Moves to Reassure Investors After MSCI Downgrades Information\nFlow<\/p>\n
Jakarta. Indonesia\u2019s financial regulator said a review by MSCI\nhighlighted the need for continued reforms to improve transparency and\nmarket integrity, while reaffirming that most aspects of the country\u2019s\ncapital market accessibility remain unchanged.<\/p>\n
The assessment comes after MSCI lowered Indonesia\u2019s \u201cInformation\nFlow\u201d rating in its 2026 Global Market Accessibility Review, citing\nconcerns over limited visibility into share ownership structures and\ncoordinated trading activity. The findings have intensified scrutiny of\nSoutheast Asia\u2019s largest economy at a time when its stock market has\nsuffered one of the world\u2019s steepest declines this year.<\/p>\n
Hasan Fawzi, Executive Head of Capital Market, Financial Derivatives\nand Carbon Exchange Supervision at Indonesia\u2019s Financial Services\nAuthority (OJK), said MSCI\u2019s review showed that the majority of\nIndonesia\u2019s market accessibility indicators remained stable compared\nwith last year.<\/p>\n
Of the 18 criteria assessed across five market accessibility\nsegments, 10 received MSCI\u2019s highest \u201c++\u201d rating, indicating alignment\nwith global best practices, while six retained a \u201c+\u201d rating, suggesting\nroom for further improvement. Two indicators \u2014 Information Flow and\nForeign Exchange Market Liberalization Level \u2014 remained in negative\nterritory.<\/p>\n
\u201cWe view MSCI\u2019s feedback as part of a constructive evaluation process\nthat is in line with the capital market reform agenda currently being\nimplemented by OJK, the Indonesia Stock Exchange, KSEI, KPEI, and\nindustry stakeholders,\u201d Hasan said in a statement on Friday.<\/p>\n
MSCI said the downgrade in Information Flow reflected insufficient\ntransparency regarding beneficial ownership and trading activity, making\nit more difficult for investors to assess companies\u2019 true free float and\nundermining efficient price formation.<\/p>\n
The concerns were first raised in January, when MSCI warned that\nIndonesia could face a potential downgrade from emerging-market status\nif transparency issues were not addressed. While investors broadly\nexpect Indonesia to retain its place in MSCI\u2019s Emerging Markets Index,\nany downgrade could trigger billions of dollars in passive investment\noutflows.<\/p>\n
Indonesia\u2019s benchmark Jakarta Composite Index has fallen roughly 29%\nthis year, making it the worst-performing major equity market globally.\nForeign investors have recorded net sales of about $3.65 billion in\nIndonesian stocks amid concerns over governance, transparency, and\nbroader economic policy.<\/p>\n
In response, Indonesian authorities have rolled out a series of\nreforms aimed at strengthening market credibility. These include\nimproving share ownership data, expanding beneficial ownership reporting\nrequirements, enhancing market surveillance capabilities, strengthening\ndisclosure standards, and updating regulations designed to improve\ntransparency and investor protection.<\/p>\n
Hasan said MSCI had acknowledged some progress, particularly in areas\nrelated to foreign exchange market accessibility, although further\nimprovements are still needed.<\/p>\n
OJK is also coordinating with Bank Indonesia and other authorities to\nensure reforms support market development while remaining consistent\nwith macroprudential policies and risk-management objectives, he\nadded.<\/p>\n
The regulator said global index providers, including MSCI and FTSE\nRussell, will continue gathering feedback from international investors,\nfund managers, brokers, and other market participants to assess the\neffectiveness of Indonesia\u2019s reforms.<\/p>\n
OJK maintained that Indonesia\u2019s economic fundamentals remain strong\nand said ongoing engagement with global index providers would help\nensure international investors fully understand the changes being\nimplemented.<\/p>\n
\u201cWith consistent reforms, we are optimistic that the quality and\ncompetitiveness of Indonesia\u2019s capital market will continue to\nstrengthen,\u201d Hasan said.<\/p>\n
Meanwhile, Chief Economic Affairs Minister Airlangga Hartarto said\nauthorities would continue working with OJK and the Indonesia Stock\nExchange to deepen reforms aimed at improving transparency and market\nintegrity.<\/p>\n
\u201cWe remain optimistic that Indonesia will stay on the emerging-market\ntrack, and the government is committed to completing this reform agenda\nto maintain investor confidence,\u201d he said.<\/p>\n
The minister added that authorities were also working to improve the\navailability of market information in English to make Indonesia\u2019s\ncapital markets more accessible to global investors.<\/p>\n
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