Indonesia’s financial regulator says stock index reflects fundamentals after fall

[JAKARTA] Indonesia’s stock market better reflects fundamentals now following recent market reforms and a sharp fall over the past week, the country’s head of the Financial Services Authority (OJK) said on Tuesday.

Jakarta’s main stock index dropped more than 3 per cent on Tuesday.

It has fallen more than 7 per cent since global index provider MSCI removed more than a dozen companies from its Indonesia indexes last week.

OJK head Friderica Widyasari Dewi told reporters the drop was a consequence of Indonesia’s market reforms and that the index’s movements “reflected price discovery that is more aligned with fundamentals rather than merely based on sentiment”.

She made the comments at a joint press conference with stock exchange officials, executives from the Danantara sovereign wealth fund, and Sufmi Dasco Ahmad, deputy speaker of parliament and a close aide of President Prabowo Subianto.

OJK had previously said market reaction last week to MSCI’s announcement, which was followed by FTSE Russell saying it would remove Indonesian firms with high shareholding concentration from its indices, was within normal ranges.

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In January, MSCI warned that Indonesia’s equity market risked a downgrade to “frontier” status due to transparency issues, triggering a market rout that led authorities to step up efforts to introduce investor-friendly reforms.

The rupiah remained under pressure on Tuesday, hitting a record low of 17,730 a dollar ahead of the central bank’s monetary policy review due on Wednesday. REUTERS