MSCI extends Indonesia review to November, flags downgrade risk

[SINGAPORE] MSCI said that it would extend its review of Indonesia’s emerging market status to November, including a possible downgrade to frontier classification, leaving the world’s worst-performing major stock market of 2026 facing prolonged uncertainty.

The global index provider said on Tuesday (Jun 23) in its 2026 market classification review that it would consider options such as a consultation on a downgrade if sufficient progress was not evident by the time of the review.

Indonesian assets have been struggling since January, when MSCI froze the country’s stocks in its indexes and threatened a downgrade to frontier status, pointing to opaque ownership, weak free-float visibility and unreliable trading data.

MSCI in April extended its review of Indonesian markets to June and in May cut several companies, most of which were tied to tycoons, from its indexes.

A downgrade could trigger as much as US$13 billion in outflows from Indonesian equities, Goldman Sachs says, at a time when the market value has already shrunk to US$601 billion from more than US$900 billion in January.

Emerging markets in the Asia-Pacific region include countries such as China, India, South Korea and Malaysia, while Bangladesh, Pakistan, Sri Lanka and Vietnam are among the frontier markets.

MSCI on Tuesday flagged concerns from international institutional investors over persistent opacity in shareholding structures and suspected coordinated trading behaviour in Indonesia.

It added that these issues relate directly to the information flow and market infrastructure pillars of its market accessibility framework, with participants raising “profound investability concern” stemming from them.

The benchmark Jakarta stock index has dropped nearly 30 per cent this year, with foreign investors net selling US$3.9 billion worth of Indonesian equities in 2026.

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The index provider acknowledged on Tuesday recent transparency reforms announced by local regulators Otoritas Jasa Keuangan (OJK), Bursa Efek Indonesia (IDX) and Kustodian Sentral Efek Indonesia (KSEI).

MSCI added that it would continue to assess the scope, consistency and sustained effectiveness of these reforms in the context of free-float determination and broader investability assessments.

MSCI said last week that there were ongoing signs of coordinated trading distorting price formation, as well as inadequate provision of detailed market information in English.

Rating agencies Moody’s and Fitch cut their debt rating outlooks for Indonesia to negative earlier this year, citing reduced policymaking credibility. REUTERS