OJK Takes MSCI Warning on Market Downgrade Risk Seriously
The Financial Services Authority (OJK) is taking seriously the warning from global index provider MSCI regarding the risk of Indonesia’s capital market being downgraded to frontier market status. OJK Chair of the Board of Commissioners, Friderica Widyasari Dewi, stated that the regulator has responded to all concerns raised by MSCI, including a direct meeting in New York approximately two months ago to discuss feedback from global investors.
Friderica explained that several steps have already been taken to improve transparency. The threshold for disclosing shareholder identity has been lowered from above 5 percent to above 1 percent. Additionally, regulations concerning the ultimate beneficial owner (UBO) have been adjusted to meet MSCI’s concerns. On the liquidity side, the OJK supports a regulatory adjustment to increase the minimum free float requirement from 7.5 percent to 15 percent, with implementation being carried out in stages.
To ensure effective communication, the OJK has instructed the Indonesia Stock Exchange (BEI) to hold regular technical meetings with MSCI. The regulator also emphasised that it will strengthen law enforcement in the capital market, imposing strict sanctions on violations and conducting delistings if necessary.
MSCI released its 2026 Market Classification Review on 23 June (US time), acknowledging the transparency reforms announced by the OJK, BEI, and the Indonesian Central Securities Depository (KSEI). These include the enhanced disclosure of shareholders owning more than 1 percent, a more detailed investor classification, the introduction of a High Shareholders Concentration (HSC) framework, and the roadmap to increase the minimum free float requirement to 15 percent.
However, MSCI cautioned that while these announcements are a step in the right direction, what matters for international institutional investors is the consistent implementation and sustainable effect of these measures across the market. MSCI stated it will continue to assess the scope, consistency, and ongoing effectiveness of Indonesia’s capital market, with the situation remaining under close watch until the November 2026 MSCI Index Review. If sufficient progress is not evident by that time, MSCI will consider various options, potentially including a consultation on reclassifying Indonesia from an Emerging Market to a Frontier Market.