Indonesia's MSCI Status Could Be Downgraded if Regulators Halt Capital Market Reforms

MSCI’s decision to retain Indonesia’s status as an Emerging Market (EM) in the 2026 Market Classification Review has brought relief to the market. However, Indonesia remains under monitoring, meaning the effectiveness of various capital market reforms will be tested again in the next evaluation in November 2026.

Head of Research at Maybank Sekuritas Indonesia, Jeffrosenberg Chenlim, assessed in a research note on 24 June 2026 that the MSCI decision was a neutral to slightly positive outcome, as it met market expectations and was better than the scenario of initiating a consultation to downgrade Indonesia to Frontier Market status.

“Indonesia remains within the Emerging Market framework. The absence of immediate escalation provides short-term relief and reduces the risk of significant negative sentiment in the market,” said Jeffrosenberg.

However, MSCI continues to highlight issues regarding share ownership transparency and potential coordinated trading activities. According to the index provider, the consistency of implementation and the long-term effectiveness of these reforms remain key factors in the assessment.

Jeffrosenberg noted that MSCI’s stance is consistent with its standard market classification process. This process begins with identifying market accessibility issues, followed by a monitoring period, consultation if problems remain unresolved, a final decision, and implementation.

“Indonesia is currently still in the monitoring stage, so it has not yet entered the consultation phase regarding a market classification change,” he said.

Nevertheless, this MSCI decision is not expected to trigger a significant inflow of foreign funds immediately. According to Jeffrosenberg, global investors who use MSCI as a benchmark are likely to wait for the results of further evaluations before increasing their exposure to the Indonesian market.

He stated that the evaluation in November will be a crucial moment to measure the effectiveness of the reforms implemented by regulators.

Going forward, Jeffrosenberg expects capital market authorities to expand the scope of the High Shareholding Concentration framework and strengthen ultimate beneficial ownership disclosure requirements as part of efforts to improve market transparency and meet the standards expected by MSCI.