Jakarta. Indonesian market authorities held talks with MSCI on Monday after a steep selloff in local equities rattled investor confidence and revived concerns over the country’s global market classification, while state asset manager Danantara said it has begun buying stocks it sees as fundamentally undervalued.

The meeting, conducted online at the Indonesia Stock Exchange (IDX) building, brought together representatives from the IDX, the Financial Services Authority (OJK) and MSCI after a series of sell-offs in the Jakarta Composite Index (JCI) last week triggered temporary trading halts. The JCI fell 6.94% week on week to close at 8,329.61, down from 8,951.01 the previous week, and slid a further 4.88% on Monday, extending losses amid continued volatility.

Danantara Chief Investment Officer Pandu Sjahrir attended the meeting as an observer, saying he was there to represent the perspective of an institutional investor rather than as a policymaker. He stressed that the stock exchange operates independently.

“We are just buyers of stocks,” Pandu told reporters ahead of the meeting. “We see Indonesian equities as attractive because the economy is solid and valuations are compelling.”

The discussions focused on feedback from MSCI on reforms needed to strengthen Indonesia’s equity market, including disclosure standards, shareholder ownership structures, and public free-float policies. Another key topic was expanding the role of domestic pension funds in the stock market, particularly in relation to loss-provisioning rules under the Financial Sector Development and Strengthening Law (P2SK).

Pandu said higher pension fund allocations to equities could help support market valuations. Pension funds currently invest about 10% to 12% in stocks, a figure that could rise to at least 15% after the government raised the cap on equity investments for insurance companies and pension funds to 20% from 8%, initially limiting investments to blue-chip stocks in the LQ45 index.

MSCI has given Indonesia until May 2026 to address outstanding market issues. Failure to meet its assessment criteria could raise the risk of Indonesia being downgraded from emerging market to frontier market status, a move that could trigger capital outflows from global funds tracking MSCI benchmarks.

The IDX responded by increasing the minimum free float requirement for listed companies to 15% from 7.5% and tightened disclosure and transparency rules to strengthen investor protection and signal its commitment to market reforms.

Despite the sell-offs, Pandu said trading data showed encouraging signs, including net foreign buying during the first half of the session. He added that recent pressure has been concentrated in stocks with stretched valuations or weaker fundamentals, while fundamentally strong companies continued to attract investor interest.

“Stocks that were previously seen as uninvestable or excessively expensive have corrected,” he said. “But fundamentally sound stocks are still seeing net buying.”

Danantara, Indonesia’s sovereign investment fund, officially began investing in domestic financial markets on Monday, Pandu said. The fund is selectively accumulating shares of companies with strong cash flow, solid fundamentals and healthy liquidity, though he declined to name specific stocks.

Market participants should avoid overreacting to short-term volatility, Pandu added, urging investors to focus on medium- to long-term prospects. “For stocks with good valuations and strong fundamentals, this could be a good time to buy,” he said.

The JCI touched an intraday low of 7,820 before closing at 7,922, with all sectoral indices ending in the red. The basic materials sector posted the steepest decline, falling more than 10%, while major bank stocks were mixed but largely held up better than the broader market.

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