Ahead of MSCI Announcement, Exchange Boss Stresses Transparency
The Indonesia Stock Exchange (IDX) has requested listed companies to conduct a thorough review of their ownership structures, ensuring that the disclosure of beneficial owners is clearly communicated and integrated into good corporate governance practices.
Kristian S Manullock, Director of Transaction Supervision and Compliance at the IDX, stated that this initiative aims to increase transparency and build trust among capital market investors. According to him, the concept of disclosing the Ultimate Beneficial Owner (UBO) is not merely a regulatory obligation but also a manifestation of a company’s commitment to good governance, integrity, and information openness.
“Transparency and clarity in ownership structures have now become essential elements for investors. Investors no longer only want to know a company’s performance, but also want to know the parties who actually own and control the company in which they are investing,” he said during the ‘Strengthening Market Integrity’ event at the IDX building in Jakarta on Thursday.
Kristian explained that UBO disclosure aligns with the capital market reform agenda, specifically within the eight action plans for accelerating capital market reform, which cover aspects of liquidity, transparency, governance, enforcement, and synergy. “By increasing ownership transparency, we are building a more trustworthy and resilient market foundation,” he noted.
Currently, listed companies are required to submit information regarding shareholders, affiliations of controlling parties and beneficial owners, as well as shareholdings of 5% or more. Furthermore, the Financial Services Authority (OJK), together with Self-Regulatory Organisations (SRO), has lowered the threshold for shareholder publication to as low as 1%. This allows regulators and the public to gain a better view of corporate ownership structures and relationships with related parties.
“This step will strengthen investor confidence while simultaneously increasing the credibility of the Indonesian capital market,” he added. Kristian further noted that regulators and all stakeholders will continue to collaborate to ensure effective implementation.
As information, the market is currently awaiting the announcement of the MSCI Global Market Accessibility Review, scheduled for release in the early hours of Friday. This annual review carries massive implications as it evaluates the level of capital market accessibility in various countries along with the quality of their market infrastructure.
For the Indonesian equity market, tomorrow’s announcement is a crucial focal point. Any adjustments to market classification methodology, special treatment for equity instruments, or reviews regarding regulations on public float weight or free float rules will have a structured impact on the composition of global passive fund portfolios.
This decision has the potential to trigger investment position adjustments involving large transaction volumes. It also carries the potential to create liquidity and price volatility for large-cap issuers on the Indonesia Stock Exchange by the close of trading this weekend.
In addition to the Accessibility Review, MSCI will also soon release the MSCI Annual Market Classification Review on Wednesday. This release will be a determining factor for the Indonesian equity market regarding whether Indonesia remains in the Emerging Market category or, in the worst-case scenario, could be downgraded to a Frontier Market, a fear held by some investors in recent months following MSCI’s notification regarding market transparency.