Jakarta. Indonesian businesses have aired their concerns about MSCI’s proposed downgrade to Jakarta’s market, saying that the premature announcement could affect expansion plans and job creation.

The American index provider proposed Friday to slap the “standalone” market label on Indonesia, which could leave Jakarta out of the main indices tracked by global funds and spark major capital outflows.

MSCI is giving Indonesia time to make changes until the end of June 2027, but the plan alone already fueled an 11.57% drop in the Jakarta Stock Index (JCI) at Friday’s close. 

Authorities and the Indonesian commerce chamber Kadin have admitted to being caught off guard, citing MSCI’s original plans to release its review of whether Jakarta deserves to stay in the “emerging market” group next month.

Kadin chief Anindya Bakrie said businesses deserve an explanation from MSCI as to why it decided to launch a consultation ahead of the November deadline.

The business lobby demands clarification regarding the communication inconsistency and whether it gives Jakarta time to prove its market reforms bear fruit.

According to Anindya, the free-falling JCI shows the market’s sensitivity to how index providers communicate its assesments.

“It affects companies that need capital to expand, create jobs, and drive the economy. Millions of investors and public shareholders seek a healthy market and a fair assessment,” Anindya was quoted as saying in a press statement.

“Any sort of communication that can cause major shocks must come with a clear basis.”

Reclassifications should take into account the listed firms’ quality, market cap, transaction frequency and value, market infrastructure, as well as progress in governance,  Anindya said. The business mogul, however, admitted that the latest threat should motivate Indonesia to make improvements to protect investors' trust.

The Indonesia Stock Exchange (BEI) has sought further clarification from the MSCI.

Senior deputy economic minister Dradjad Hari Wibowo urged domestic investors not to take the MSCI proposed reclassification at face value. He called on investors to “make the necessary calculations” as Jakarta seeks to restore calm. 

Indonesia is currently in the “emerging” market group that has significant openness to foreign ownership and greater liquidity. 

MSCI had originally weighed moving Jakarta to the “frontier” group of smaller-sized and less accessible markets following transparency issues. The threat prompted Jakarta to pursue market reforms, including disclosing the names of shareholders with at least 1% ownership.

MSCI has said reclassification to the “standalone” occurs in cases of “severe deterioration in market accessibility or size and liquidity”.

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