FTSE Russell Takes Firm Stance: Indonesian Stocks with Low Free Float to be Removed from Global Index
Global index provider FTSE Russell is taking a firm stance against Indonesian-listed companies with high shareholding concentration (HSC). Following the precedent set by Morgan Stanley Capital International (MSCI), FTSE Russell is preparing to remove issuers with low free float from its global index during the June 2026 evaluation. This decision follows an ongoing evaluation of the Indonesian capital market’s development since February 2026. The policy underscores the increasing scrutiny from global index providers regarding liquidity quality and the shareholding structures of Indonesian issuers.
Nafan Aji Gusta, Senior Market Analyst at Mirae Asset Sekuritas, noted that FTSE Russell is following MSCI’s disciplined approach to tightening regulations on stocks with high shareholder concentration. He stated that this serves as a signal to the domestic capital market regarding the importance of liquidity quality, which must be prioritised alongside market capitalisation.
Issuers must focus on enhancing their ‘investability’ for global investors. Inclusion in international indices such as MSCI and FTSE Russell is no longer determined solely by market capitalisation, but also by the quality of share liquidity, transparency of ownership, and the health of trading activity in the market. Consequently, companies can no longer rely on overly concentrated ownership structures if they wish to attract foreign capital inflows, as global institutional investors tend to avoid stocks with small free floats or those controlled by a few parties due to perceived risks.
Gusta added that issuers must prove that public shares are genuinely held by a diverse group of public investors, rather than being a mere formality or controlled by hidden affiliates. He noted that FTSE Russell and MSCI possess research teams capable of detecting if a free float is purely superficial while substantial control remains with affiliated parties. Therefore, issuers must be proactive in explaining their ownership structures and strategic plans to increase market liquidity to global index providers.
Furthermore, there are calls to tighten free float regulations, including considering a minimum threshold of 15 per cent. Alongside stricter rules, enhanced supervision and the enforcement of sanctions are deemed essential to ensure transparency and liquidity quality. The role of the Financial Services Authority (OJK) is also seen as vital in supporting this oversight. Gusta suggested that if an issuer is suspended or delisted due to consistent failure to meet liquidity requirements or indications of abnormal concentration that harms retail investors, such measures must be implemented.