Jakarta. The Financial Services Authority (OJK) on Friday tried to cool down market fears after index provider MSCI threatened to further downgrade Indonesia to a “standalone” status. 

MSCI had just announced that Indonesia could fall from the “emerging market” group to the “standalone” category, which includes countries with severe market access problems. They are set to make the final decision by the end of June 2027. The announcement quickly caused Indonesian stocks to plunge 8%. 

OJK boss Friderica Widyasari Dewi said that the authority “respected” MSCI’s view and independence. The authority will also act on MSCI’s recommendations while striking an optimistic tone.

“We believe the domestic market will remain prospective and attractive,” Friderica said in a statement.

“This is backed by Indonesia’s well-maintained economic fundamentals, an ever-growing investor base, competitive stock valuations, and its issuers overall are still showing positive fundamental performance.”

Indonesian equities had been under pressure since January after MSCI mulled a move to “frontier” status following transparency concerns, hence kicking Jakarta out of the “emerging” group that has more developed and liquid capital markets. Jakarta has been pursuing market reforms to convince MSCI not to forge ahead with the plan. These changes include disclosing names of shareholders with at least 1% ownership and implementing a 15% minimum free float rule. 

MSCI wrote that these reforms failed to convince market participants, adding that a frontier market reclassification “would not properly recognize the depth of the market problems”. They will reconsider the move unless there is clear evidence of “material improvements in market governance and functioning”.

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