Jakarta. Indonesia’s stock market recovery is expected to take time despite a sweeping reform push by the government, the Financial Services Authority (OJK), and the exchange (IDX), as the benchmark index  (JCI) remains in bearish territory after last week’s sharp correction.

Market participants cautioned that Friday’s rebound did not yet signal a trend reversal, but rather a technical pullback following heavy selling earlier in the week. Structural challenges still loom for issuers, investors, and regulators alike, including liquidity constraints, governance reforms, and the need to align Indonesia’s market practices with global standards.

One key proposal under discussion is raising the minimum free float requirement from 7.5% to 15%. While seen as necessary to meet international benchmarks, the move could require substantial funding to absorb additional share supply, particularly for large-cap companies with market capitalizations above Rp 100 trillion ($5.95 billion).

Efforts to curb so-called “fried stocks”, a local term referring to highly speculative shares whose prices are often manipulated by dominant players or market makers to create the illusion of strong demand, have also drawn caution from market watchers. They warn that share prices do not automatically rise alongside strong fundamentals without deep liquidity, something retail investors typically lack.

Still, market players have broadly welcomed the reform agenda rolled out by regulators, stressing that it must be consistent and long term rather than a short-lived intervention triggered by external pressure. Investors expect reforms to strengthen credibility and align Indonesia’s capital market with global index providers such as MSCI and FTSE.

OJK Unveils Reform Roadmap
On Sunday, OJK unveiled eight accelerated reform measures to respond to recent market volatility, particularly following MSCI’s announcement that weighed heavily on equities last week.

The measures include a new free float policy, enhanced transparency on ultimate beneficial ownership, stronger shareholder data integrity, demutualization of the stock exchange, tougher enforcement and sanctions, improved issuer governance, deeper and more integrated market development, and broader coordination with stakeholders.

The proposed demutualization could open the door for strategic investors, including sovereign entities. Danantara has been cited as a potential shareholder, with an estimated stake of 15–30%.

The reform agenda was discussed at a meeting at the exchange’s main hall in Jakarta, attended by senior regulators, exchange executives, and representatives of self-regulatory organizations.

Earlier, Chief of Economic Affairs Minister Airlangga Hartarto said President Prabowo Subianto was closely monitoring market developments following MSCI’s decision and assessments by global institutions such as Goldman Sachs and UBS.

Airlangga stressed that manipulative speculative practices would not be tolerated, even as authorities work to preserve market stability and strengthen domestic economic fundamentals.

MSCI Fallout and Market Moves
The reform push follows MSCI’s decision to temporarily freeze Indonesia’s index rebalancing process, citing concerns over transparency in ownership structures. The index provider has given authorities until May 2026 to demonstrate meaningful progress, warning that failure to do so could jeopardize Indonesia’s accessibility status and potentially reclassify it from emerging to frontier market.

The Jakarta Composite Index plunged 7.3% to 8,320 last Wednesday and briefly slid as much as 8.8%, triggering a trading halt. A day later, the index fell another 1% after an intraday drop of 10% prompted a second halt. On Friday, the index rebounded 1.1% to 8,392, though foreign investors still recorded a net sell of Rp 1.5 trillion, bringing year-to-date outflows to Rp 9.8 trillion. As of last week, the index was down 3.67% from its recent all-time high above 9,100.

OJK Vice Chair Friderica Widyasari Dewi said regulations on raising the minimum free float to 15% would be issued in the near term, calling the policy a concrete step to boost liquidity and transparency while aligning Indonesia with global practices.

She said existing issuers would be given a transition period, with compliance achievable through corporate actions such as rights issues, share placements, employee stock ownership programs, divestments, or dematerialization.

Mixed Views from Analysts
Market observers remain divided on the near-term outlook. Some analysts say the market is still in a consolidation phase, while others warn that confidence risks remain elevated if reforms fail to restore trust among global investors.

Analysts from firms including Mirae Asset Sekuritas and Indo Premier Sekuritas see room for gradual recovery in February if economic growth remains solid and regulatory clarity improves. Others caution that prolonged uncertainty could prompt forced selling by global index funds such as BlackRock and Vanguard, potentially weighing further on liquidity and funding access.

“The market needs consistent structural reform, not short-term intervention,” said Hendra Wardana, noting that long-term trust in institutions matters more than temporary policy moves.

“The regulatory clean-up may be painful at the outset, but it is the price that must be paid for a healthier and more credible capital market,” said Chory Agung Ramdhani of BRI Danareksa Sekuritas.