Observer: RI's Emerging Market Status Maintains Investor Confidence

Jakarta (ANTARA) - Capital market observer and Founder of Republik Investor, Hendra Wardana, assessed that the decision by global stock index provider MSCI to retain Indonesia in the Emerging Market category is positive news for the capital market as it maintains investor confidence. The Emerging Market status is considered important to ensure Indonesia remains on the radar of global institutional investors and various international investment funds that use the MSCI Emerging Markets index as a benchmark for fund placement. “By maintaining this status, the risk of massive foreign fund outflows due to a change in market classification can be avoided, thus providing better stability for the domestic stock market,” Hendra said in his statement in Jakarta on Saturday. Nevertheless, MSCI downgraded Indonesia’s assessment on the Information Flow criterion from previously positive (“+”) to negative (“-”). According to Hendra, this note indicates that MSCI is still paying attention to aspects of market transparency, particularly regarding the openness of share ownership structures, the quality of information flow, and ownership concentration which is deemed to potentially affect fair share price formation. “MSCI explicitly highlights information disclosure and market accessibility for global investors. This note serves as a reminder that Indonesia still has homework to improve governance, liquidity, and the quality of the capital market to gain more trust from international investors,” he said. Therefore, the sustainability of the Emerging Market status going forward will heavily depend on the ability of regulators and market participants to improve the quality of governance and transparency. Hendra mentioned several aspects that need strengthening, including increasing the free float of issuers, investor protection, information disclosure of listed companies, and the efficiency of trading mechanisms on the exchange. “If reforms run effectively, not only can the Emerging Market status be maintained, but Indonesia also has the potential to gain an increased global investment weight in the future,” he explained. From the market side, MSCI’s decision is expected to provide positive sentiment for the movement of the Composite Stock Price Index (IHSG) in the short term. The certainty that Indonesia has not experienced a classification downgrade is considered capable of alleviating the uncertainty that has overshadowed the market over the past few months. “Market participants were previously quite worried about the possibility of a classification downgrade that could trigger foreign fund outflows. With that scenario not occurring, the space for restoring investor confidence becomes more open,” said Hendra. Technically, the MSCI sentiment has the potential to push the IHSG to strengthen in weekend trading and test the resistance area at 6,377. If that level can be breached with strong volume support, the opportunity for further strengthening will become more open. Meanwhile, the 6,074 area is an important support level that needs to be maintained to preserve the market’s recovery momentum. “Thus, the MSCI announcement can be a positive short-term catalyst for the IHSG, although in the medium to long term, investor attention will still be focused on the realisation of capital market transparency and governance reforms in Indonesia, which are MSCI’s main highlight,” he added.