Jakarta. November will be a crucial time for the Indonesian capital market as index provider MSCI will release its delayed review.

MSCI has given Indonesia time until November, warning that it could downgrade Jakarta to "frontier" markets from the current "emerging" status if it fails to make sufficient progress. MSCI’s warnings over transparency and coordinated trading had led to reforms at the Indonesia Stock Exchange (IDX). 

As the clock ticks toward MSCI’s review, FTSE Russell recently decided to keep Indonesia unchanged in the secondary emerging market group and away from its watchlist. Financial watchdog OJK’s chief capital market supervisor Hasan Fawzi said that the decision showed that Indonesia’s market reforms were heading in the right direction.

"Hopefully, this will be a benchmark for other index providers and global investors’ attitude towards Indonesia’s commitment to continuously improve its market integrity and investability,” Hasan told Investor Daily Summit in Jakarta on Thursday.

Jakarta hopes for “objective” assessments. However, he said that the ongoing capital market reforms were not solely meant to address MSCI’s concerns, citing that Jakarta had wanted to strengthen its investability. 

Iding Pardi, a director at the IDX, told the same conference that the bourse had intensively engaged with global index providers and international investors to show that the reforms had been underway. 

“The decisions of the global index providers are out of our control. But what we can make sure of is that our capital market’s transformation is delivering the expected impact,” Iding said.

Iding also told the audience that it’d be unwise to gauge the health of the capital market just by the movement of the Jakarta Composite Index (JCI) alone. Such analysis must take into account the listed companies’ fundamentals, trading liquidity, capital raising, and share ownership structure.

The JCI touched an all-time high of 9,135 in January before the steep drops. By mid-year, the market began to show signs of gradual recovery.

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