Reasons Why MSCI Maintains Restrictions on Indonesian Stocks
JAKARTA. Global index provider MSCI has decided to maintain restrictions on Indonesian stocks in the May 2026 index review. This decision comes as MSCI evaluates the effectiveness of Indonesia’s recently announced market transparency reforms.
In its announcement on Monday (20/4/2026), MSCI confirmed it will not add Indonesian stocks to the MSCI Investable Market Index (IMI) in the May review.
Additionally, the company is continuing to freeze increases in foreign investor inclusion and the number of stocks that can be included in the index for Indonesian issuers.
MSCI is also holding back steps to migrate stocks between index segments, including transfers from small-cap to standard indices. This means no upward movement for Indonesian stocks in the global index structure.
This policy is designed to enhance liquidity while curbing potential stock manipulation.
However, MSCI stated that more time is needed to evaluate the effectiveness of these measures.
The index provider is reviewing the scope, consistency, and quality of the new data provided by Indonesian authorities, with further updates scheduled for June 2026.
Risk of downgrade and market pressure
In January, MSCI warned that Indonesia—as a G20 economy valued at around US$1.4 trillion—risks a downgrade from emerging market to frontier market status if transparency issues do not improve.
That warning has reportedly pressured Indonesia’s stock market capitalisation, with an estimated loss of market value of up to around US$120 billion by early April.
MSCI also confirmed it will not incorporate new disclosure data, including ownership reports above 1%, into free float calculations or indices until the evaluation process is complete and market participant input is considered.
Additionally, MSCI stated it will remove effects flagged by Indonesian regulators under the new framework, following practices applied in other markets.
On the other hand, about a week earlier, MSCI’s competitor FTSE Russell also maintained Indonesia’s status as a secondary emerging market without changes. FTSE even stated it has not included Indonesia in its index watch list and will provide further updates in the June review.
With this decision, Indonesia’s capital market continues to face rigorous assessment from the two major global index providers, amid ongoing reform efforts.