MSCI May Downgrade Indonesia’s Stock Market Classification
Jakarta, CNBC Indonesia — MSCI has announced plans to change the classification of Indonesia’s stock market from Emerging Market to Standalone Market. The proposal is still being consulted on with market participants, and a final decision will be announced no later than 30 June 2027.
“MSCI will announce its final decision at the end of June 2027 and may provide an interim update on market participants’ feedback during the consultation period,” the announcement said, as quoted on Friday (16 October 2026).
MSCI said it had opened a consultation on the proposed reclassification of the MSCI Indonesia Index. It may also issue an interim update on feedback from market participants during the consultation period.
MSCI considers Indonesia’s Emerging Market status no longer appropriate given current conditions in the domestic stock market. Its assessment is based on market participants’ concerns about the investability of Indonesian shares, including the transparency of ownership structures and alleged coordinated trading practices.
In its market classification review in June 2026, MSCI said a number of market participants had raised significant concerns about investors’ ability to invest in the Indonesian stock market transparently and efficiently.
Indonesia’s capital-market regulators have announced various reforms, including greater disclosure of shareholders with holdings above 1%, more detailed investor classification disclosures, reporting on High Shareholding Concentration (HSC), and a roadmap towards a minimum free-float requirement of 15%.
“Institutional investors have stressed the need for consistent implementation and evidence of a sustained, material impact from these announcements,” MSCI said.
However, MSCI said there had not yet been adequate and consistent progress across the Indonesian stock market. Concerns about market dysfunction persist, including alleged coordinated trading practices and a lack of evidence of enforcement having a significant impact.
Market participants have told MSCI that sufficient progress has not yet been consistently demonstrated across the Indonesian stock market. Despite the announced reforms, significant concerns remain about market dysfunction, including continued alleged coordinated trading behaviour and a lack of evidence of meaningful enforcement.
MSCI therefore considers Indonesia’s Emerging Market classification no longer appropriate and has launched a consultation on a proposal to reclassify the country as a Standalone Market.
MSCI has formally begun consulting on the proposed change to Indonesia’s status as a Standalone Market. It also said that, based on feedback from market participants, downgrading Indonesia to Frontier Market status would not adequately reflect the extent of the problems in the domestic stock market.
MSCI expects to proceed with the reclassification plan unless the consultation produces clear evidence of material improvements in market governance and functioning that could justify reconsidering the decision.
In line with the announcement, MSCI said it would maintain a freeze on certain index-related changes for Indonesian shares until further notice.
Under the policy, MSCI will not implement increases to the Foreign Inclusion Factor (FIF) or Number of Shares (NOS). It will also not add shares to the MSCI Indonesia Investable Market Index (IMI), or move shares into index segments with higher market-capitalisation thresholds.
FIF is the factor MSCI uses to determine the proportion of a company’s shares available to foreign investors for index calculations. NOS refers to the number of shares used in those calculations.
MSCI also confirmed that it would continue removing shares identified by Indonesian authorities under the HSC framework.
In addition, disclosures of shareholders with holdings above 1% will continue to be used to adjust free-float estimates.
MSCI is inviting market participants to submit feedback on the proposed reclassification of the Indonesian index until 30 April 2027. A final decision on the classification change will be announced on or before 30 June 2027.
The consultation’s outcome will be an important factor in MSCI’s decision on whether Indonesia can retain its Emerging Market status or should be reclassified as a Standalone Market.