Jakarta. Senior economic minister Airlangga Hartarto admitted Friday that the Indonesian government was taken aback by MSCI’s latest announcement, saying that he found it strange that the index provider did not bring it up during the Bangkok talks.

MSCI announced early in the morning that it was mulling downgrading Indonesia’s status to a “standalone” market. Southeast Asia’s biggest economy had spent the past months convincing MSCI to drop the earlier “frontier” market reclassification by pursuing major market reforms. 

“This leaves a big question mark. [MSCI] did not bring up this [issue] when they met [our authorities] in Thailand. And it hasn’t been a week [since their meeting], but then again, let's see. We must not hold negative suspicions,” Airlangga told the press in his office.

Airlangga did not go into detail on the Bangkok meeting, but claimed that Finance Minister Suahasil Nazara and Bank Indonesia Governor Destry Damayanti had met with MSCI high-level officials. They had traveled to the Thai capital for the IMF-World Bank Annual Meeting.

Local news outlet Katadata reported that sovereign fund Danantara held a roundtable with MSCI representatives and Suahasil there. Bank Indonesia deputy governor Thomas Djiwandono was in the room.

MSCI moves have been putting Indonesian equities under stress since earlier this year after the American finance firm weighed a “frontier” status, hence possibly kicking Jakarta out of the “emerging” market group.

Frontier markets have smaller stock markets and lower liquidity, while the “emerging” ones are said to offer greater investment opportunities. The “standalone” status refers to countries that MSCI has to take out of its classifications following serious market accessibility and functioning problems.

At home, Jakarta has been trying to reform its capital market to change MSCI’s mind. This includes disclosing names of shareholders with at least 1% ownership and imposing 15% minimum free float rule. 

In a statement responding to the “standalone” threat, financial watchdog OJK chief Friderica Widyasari Dewi said that the domestic capital market would “remain attractive”, citing Indonesia’s “well-maintained economic fundamentals”. 

MSCI has now given Indonesia time until the end of June 2027. It has begun accepting feedback from market participants until April.

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