Jakarta. The government seeks to restore calm to the equity market following MSCI’s panic-inducing downgrade plans on Friday, with senior deputy economic minister Dradjad Hari Wibowo reminding investors not to take what the American index provider says at face value.

Indonesian stocks even fell 11.57% after MSCI proposed to slap the low-tier “frontier” market on Jakarta. The Indonesia Stock Exchange (IDX) also saw a temporary trading halt following the sharp sell-off.

Dradjad urged investors to make a comprehensive analysis of the market and gains before rushing into panic mode.

“Yes, MSCI has a high reputation. We indeed have to pay attention to what they say, but they are not always right,” Dradjad told the press, even pulling a printed version of an article uploaded by the Frankfurt-based exchange organization Deutsche Börse. 

The 2025 article was titled “Five reasons why the MSCI World is not a perfect investment”, which quoted investor fund analyst Ali Masarwah. The expert pointed out that Germany’s DAX gained 15.5% at a time when the MSCI World Index — which captures large- and mid-cap representatives across developed markets — sank 3.7%.

Dradjad went on to say that this shows that “not everything that MSCI does is beneficial for investors”.

“We will continue to pursue reforms regardless of MSCI’s decision,” Drajad, who had only spent two weeks in the cabinet, said.

“It’s not that we are being stubborn. We will fix what needs to be fixed. We will implement concrete steps. We have been enforcing capital market laws, and we will continue to do so.”

He urged domestic investors to “do the calculations and not easily panic”.

Drajad’s boss Airlangga Hartarto trumpeted Indonesia’s “strong fundamentals” when pressed about the reclassification, saying that the proposed downgrades “had been playing with the market sentiments”.

The sudden announcement has taken the government by surprise, according to Airlangga, saying that MSCI did not mention the reclassification during the recent high-level talks with finance chief Suahasil Nazara in Bangkok.

“We hope investors can tell sentimentals and fundamentals apart. ... Why do other agencies not question [our market]? Why is it always the MSCI that is systematically giving us a deadline?” Airlangga said.

Earlier this year, MSCI threatened to reclassify Indonesia’s status from “emerging” to a “frontier” market. 

The current “emerging” status means the equity market has a bigger size and liquidity, with doors wide open to foreign ownership. Markets in the “frontier” group are smaller in the aforementioned criteria. The “standalone” status is worse than the “frontier” label, as it would exclude Indonesian stocks from indices tracked by global funds, hence possibly fueling a multi-billion-dollar capital outflow. 

MSCI is set to announce its final decision by the end of June 2027. It is open to changing its mind if Indonesia shows meaningful improvements. The IDX intends to seek further clarification.

Southeast Asia’s biggest economy has spent the year reforming its equity market, among others, by disclosing the names of shareholders with at least 1% ownership after MSCI flagged transparency issues. Jakarta was expecting MSCI to release its review next month.

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