Indonesian stocks plunged as much as 11% on Friday, marking their steepest one-day decline since January 1998, after index provider MSCI launched a consultation on a proposal to reclassify Indonesia from an emerging market to a standalone market.
The IDX Composite index opened at 5,393.92, compared with its previous close of 5,863.78. At last check, the index was down 10.76% at 5,233, close to its 52-week low of 5,193.22. The index’s 52-week high stands at 9,174.47.
In the past one year, the index has fallen nearly 36%.
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Why Is MSCI Considering Downgrading Indonesia?
MSCI said it had launched a consultation on the proposed reclassification of the MSCI Indonesia Indexes from Emerging Market to Standalone Market status, citing persistent concerns over market investability, transparency and functioning.
In its June 2026 Market Classification Review, MSCI said market participants had raised significant concerns over opaque shareholding structures and suspected coordinated trading behaviour in the Indonesian equity market.
Although Indonesian authorities have announced several reforms, institutional investors have stressed the need for consistent implementation and evidence of a sustained, material improvement in market functioning.
The proposed reforms include enhanced disclosure of shareholders holding more than 1%, more detailed investor classification disclosures, High Shareholding Concentration (HSC) reporting and a roadmap towards a minimum free-float requirement of 15%.
However, MSCI said market participants had not observed sufficient progress consistently across the market. Concerns over suspected coordinated trading and the lack of evidence of meaningful enforcement also remain.
MSCI had indicated in June that it could initiate a reclassification consultation if sufficient progress was not evident by the November 2026 Index Review.
What Happens Next?
MSCI said it expects to proceed with the proposed reclassification unless feedback from the consultation provides clear evidence of material improvements in market governance and functioning.
Market participants can submit feedback on the proposal until April 30, 2027. MSCI will announce its final decision on or before June 30, 2027, and may provide an interim update on feedback received during the consultation period.
MSCI Extends Freeze On Indonesian Securities
MSCI said the existing freeze on certain index-related changes for Indonesian securities would remain in place until further notice.
Under the restrictions, MSCI will not implement increases in Foreign Inclusion Factors (FIF) or Number of Shares (NOS), add securities to the MSCI Indonesia Investable Market Index (IMI), or allow upward migrations across index size segments.
The index provider will continue deleting securities identified by Indonesian authorities under the HSC framework and use shareholder disclosure data for holdings above 1% to adjust free-float estimates.
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