MSCI Rebalancing Becomes Momentum to Strengthen Capital Market Credibility
The Chairman of Commission XI of the Indonesian House of Representatives (DPR RI), Mukhamad Misbakhun, has asserted that the decision regarding the MSCI index rebalancing should serve as a momentum to reform and strengthen the fundamentals of the Indonesian capital market, ensuring it becomes healthier, more transparent, and more credible in the eyes of global investors.
According to Misbakhun, the pressure currently experienced in the stock market due to the removal of several Indonesian stocks from the MSCI index is a short-term consequence that must be addressed proportionally. “A strong capital market is not built solely from the euphoria of index increases, but from the credibility of the system, the quality of governance, and investor confidence in market integrity,” Misbakhun stated in a written briefing in Jakarta.
Misbakhun urged investors and market participants not to overreact to the MSCI rebalancing. He assessed that the recent pressure on the Jakarta Composite Index (IHSG) was driven more by short-term portfolio adjustments rather than a weakening of the national economic fundamentals. Consequently, he encouraged the strengthening of the domestic investor base, the improvement of issuer quality, and the deepening of financial markets so that the resilience of the Indonesian capital market does not rely too heavily on short-term foreign capital flows.
“Investors must view this from a long-term perspective. Our market maintains good prospects as long as structural reforms and the strengthening of market integrity are implemented consistently,” Misbakhun explained. Furthermore, he emphasised that Indonesia’s position as an emerging market must be maintained through continuous improvements in market quality. He noted that global investor confidence is built through regulatory certainty, transparency, and the credibility of trading systems.
Misbakhun believes the MSCI evaluation should serve as a collective introspection for regulators, the Indonesia Stock Exchange (BEI), and issuers. He noted that aspects such as free float quality, transparency of share ownership, trading liquidity, and corporate governance must be continuously strengthened to ensure the Indonesian market becomes more competitive and trusted by global investors. “If we want our capital market to be trusted internationally, we must be prepared to adhere to global standards,” he concluded.
Market observers, including Hendra Wardana, have highlighted the impact of the MSCI rebalancing, which triggered capital outflows of approximately Rp50.63 trillion and exerted pressure on the IHSG. The Indonesia Stock Exchange (BEI) noted that the MSCI rebalancing decision, while impactful, helps reduce one of the sources of uncertainty that has been shadowing the domestic financial market amidst global pressures.