Indonesia’s Next Steps as MSCI Considers Downgrading Its Market Classification

Jakarta (ANTARA) — Anyone who considers the stock market unimportant should first understand what macroeconomics is. Put simply, the stock market reflects a country’s economy.

A healthy stock market is determined not only by the amount of foreign capital flowing in, but also by a country’s ability to build investor confidence.

This is the challenge Indonesia is facing. The country is undergoing an important test as Morgan Stanley Capital International (MSCI) considers changing the classification of its national stock market.

The issue is not simply whether Indonesia can retain its Emerging Market status, but whether it can become a transparent, credible and competitive investment market.

The debate over MSCI has highlighted an important reality. In the global financial system, a country’s economic strength does not always translate directly into influence over investor perceptions.

A decision by an index provider can shape investment flows, even though it is neither government policy nor a comprehensive assessment of the national economy’s fundamentals.

Indonesia therefore needs a more considered approach than simply meeting administrative requirements. Domestic reforms must go hand in hand with economic diplomacy that understands investors’ interests, market mechanisms and the country’s negotiating position.

Adhamaski Pangeran, an economics researcher at the Global Research on Economics, Advanced Technology and Politics (GREAT) Institute, said Indonesia should appreciate MSCI. The organisation has helped prompt reforms to structural problems in the domestic capital market, particularly those concerning share-ownership transparency and trading governance.

This view underlines that external criticism need not always be seen as a threat. In many cases, assessments by international institutions can serve as a mirror, helping identify institutional weaknesses that have long remained unresolved.

In response, Indonesia has announced several reform measures. These include disclosing information about shareholders with stakes of more than 1 per cent, providing more detailed investor classifications, reporting high shareholding concentration, and drawing up a roadmap towards a minimum public free float of 15 per cent.

These measures represent progress: greater ownership transparency helps investors understand who actually controls a company, how much of its stock is freely tradable, and whether prices are being formed fairly.

However, announcing reforms does not automatically create confidence. In its statement on 15 October 2026, MSCI acknowledged some of this progress but also opened a consultation on the possible reclassification of Indonesia from Emerging Market to Standalone Market.