Opinion: Indonesia's Capital Market Still Plagued by Transparency Issues
Indonesia is striving to attract global investment to achieve 8% economic growth by 2029. However, a conducive domestic investment climate is being undermined by a weakening rupiah and a declining composite stock price index (IHSG) since late January 2026. These issues must be addressed promptly to avoid disrupting the national development plan.
Capital outflows by global investors, often triggering panic selling by less independent local investors, are a key concern. A sharp drop in the IHSG at the end of January 2026 followed an announcement by Morgan Stanley Capital International (MSCI). Some narratives suggest MSCI wields excessive influence over Indonesia’s capital market, with proposals for Indonesia to create its own global index. While the Indonesia Stock Exchange already has indices like LQ45, IDX30, and IDX80, they require further development to become global benchmarks and, crucially, demand the same transparency as MSCI.
Transparency is the bedrock of investor confidence. In response to MSCI’s requirements, authorities began publishing lists of issuers with high shareholding concentration. Yet, on 12 May 2026, MSCI’s rebalancing resulted in six Indonesian companies being removed from its Global Standard Indexes and another 13 from its Small Cap Indexes. This demonstrates the ongoing struggle to uphold transparency, which is vital for pricing, liquidity, and trust.
Several areas require immediate attention. First, capital market authorities must continuously enhance transparency practices through improved regulations and supervisory systems, including technology, to address new cyber-era loopholes. Social media is now used not only to manipulate stocks but also potentially by foreign actors to damage the image of the Indonesian stock exchange. Second, publicly listed companies must fully embrace transparency and information disclosure as a non-negotiable consequence of their status, requiring firm and consistent oversight. Third, financial literacy must be boosted. The 2025-2029 National Medium-Term Development Plan focuses on deepening the capital market by expanding investment instruments and the investor base through education. Increasing retail investors, who currently number over 20 million, is crucial as they demand greater transparency and accountability from issuers. With the world’s fourth-largest population, Indonesia has immense potential to become a haven for retail investors, following the transformative paths of China and India, which overhauled regulations to address transparency and subsequently saw massive growth in individual investor participation.