MSCI has launched a consultation on a proposal to reclassify Indonesia from Emerging Market to Standalone Market status, citing ongoing concerns about market transparency, shareholding structures, and suspected coordinated trading behavior (15/10).

The global index provider expects to announce its final decision by June 30, 2027, and will maintain its existing freeze on certain index-related changes for Indonesian securities until further notice.

MSCI Proposes Indonesia Market Reclassification

In an announcement issued in New York on October 15, 2026, MSCI said market participants had not observed sufficient progress in addressing concerns about the Indonesian equity market. The company said it expects to proceed with the proposed reclassification unless the consultation identifies clear evidence of material improvements in market governance and functioning.

MSCI's proposal follows its June 2026 Market Classification Review, which reported significant concerns about the investability of Indonesian equities. These concerns included persistent opacity in shareholding structures and suspected coordinated trading behavior.

MSCI said market participants continued to report concerns about market dysfunction despite reforms announced by Indonesian authorities. These included suspected coordinated trading and a lack of evidence of meaningful enforcement.

Indonesia's Market Reforms Face Implementation Concerns

Indonesian authorities have announced several measures to improve market transparency, including enhanced disclosure of shareholders with ownership above 1% and more detailed investor classification disclosures.

The announced measures also include High Shareholding Concentration (HSC) reporting and a roadmap toward a minimum free float requirement of 15%.

However, institutional investors have emphasized the need for consistent implementation and evidence that these measures have produced a sustained, material impact. MSCI said market participants had not observed sufficient progress consistently across the Indonesian equity market.

In June 2026, MSCI indicated that it would consider launching a consultation on reclassification if sufficient progress was not evident by its November 2026 Index Review. The latest announcement follows continued concerns raised by market participants.

MSCI also said feedback suggested that moving Indonesia to Frontier Market status would not properly reflect the extent of the identified market problems. The company therefore considers continued classification as an Emerging Market no longer appropriate.

MSCI Maintains Freeze on Indonesian Securities

MSCI will continue its existing freeze on certain index-related changes for Indonesian securities resulting from index reviews or corporate events until further notice.

Under the restrictions, MSCI will not implement increases to Foreign Inclusion Factors (FIF) or Number of Shares (NOS). It will also not add securities to the MSCI Indonesia Investable Market Index (IMI) or allow upward migrations across index size segments.

MSCI will continue deleting securities identified by Indonesian authorities under the HSC framework. It will also use shareholder disclosure data for holdings above 1% to adjust free float estimates.

MSCI Sets Consultation Deadline for April 2027

MSCI will accept feedback from market participants on the proposed reclassification of the MSCI Indonesia Indexes until April 30, 2027. The company will announce its final decision on or before June 30, 2027, and may provide an interim update on feedback received during the consultation period.

PHOTO: SHUTTERSTOCK

This article was created with AI assistance.

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