Jakarta. Indonesia should address concerns over stock ownership transparency and trading fairness rather than treat MSCI’s scrutiny as a challenge to national sovereignty, capital market analyst Hendra Wardana said, warning that failure to improve market standards could weaken investor confidence.

Hendra Wardana, founder of Republik Investor, said President Prabowo Subianto’s declaration that he was not afraid of MSCI should not be interpreted as a confrontational stance toward the global index provider.

“MSCI is not fighting Indonesia, nor is it deciding whether our economy deserves to grow. The real question is whether our capital market meets the standards of transparency, ownership disclosure and fair trading required by global investors,” Hendra said in a statement on Thursday.

He said Indonesia’s strong economic growth, large market capitalization and rising number of domestic investors did not automatically mean its stock market met international standards.

Global investors, he added, look beyond market size and need clarity on the actual owners of shares, the amount of stock genuinely available for public trading and whether share prices are formed fairly.

“If a stock appears to have a large free float on paper but is actually concentrated among certain groups and is not genuinely available in the market, investors will question the quality of our data and trading mechanisms,” he said.

Hendra said the MSCI issue should not be reduced to a matter of national pride or economic sovereignty. While Indonesia has the right to determine its own capital market policies, attracting global investment requires transparent, consistent and credible regulations.

MSCI uses its own methodology to classify markets and compile indices that serve as benchmarks for global institutional investors. If Indonesia falls short of the provider’s criteria, Hendra said, the government and market authorities should respond with concrete reforms rather than political statements.

“True courage means being willing to evaluate our own shortcomings and make improvements, not simply taking a hard line against those who assess us,” he said.

Hendra also pointed to continued foreign selling in Indonesian stocks as a sign of the need to restore investor confidence. Foreign investors recorded net selling of around Rp 527 billion ($29.21 million) on Wednesday, bringing their cumulative net selling for the year to approximately Rp 119 trillion, according to data he cited.

However, he cautioned against attributing all foreign outflows to MSCI-related concerns, noting that investment decisions are also shaped by global market conditions, the rupiah’s exchange rate, interest rates and the economic outlook.

A potential downgrade of Indonesia from emerging market to standalone market status could nevertheless prompt some investors tracking emerging market indices to reduce their exposure to Indonesian stocks, Hendra said.

Such a shift could trigger further selling pressure, reduce market liquidity and raise perceived risks associated with Indonesian assets.

“In certain circumstances, the pressure could also spill over into the rupiah, government bond market and corporate financing costs,” he said.

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