MSCI proposes taking away Indonesia's EM status

MSCI is proposing to reclassify the MSCI Indonesia Indexes from Emerging Market to Standalone Market status.

In its June classification review, MSCI found market participants had raised significant concerns regarding the investability of the Indonesian equity market, with continued opacity in shareholding structures and suspected coordinated trading behaviour.

In the review, MSCI said if sufficient progress was not evident by the November 2026 index review, it would consider launching a consultation on reclassifying the Indonesian market.

"Market participants have indicated to MSCI that, to date, sufficient progress has not been observed consistently across the Indonesian equity market," MSCI said.

It noted that while the Indonesian authorities have announced reforms such as enhanced disclosures to shareholders with ownership above 1% and more granular investor classification disclosure, institutional investors want consistent implementation and evidence of sustained material impact from these announcements.

"Despite the announced reforms, significant concerns remain around market dysfunction, including continued suspected coordinated trading behaviour and lack of evidence of meaningful enforcement," it said.

"Accordingly, MSCI considers Indonesia's continued classification as an Emerging Market no longer appropriate and is launching a consultation on a proposal to reclassify Indonesia as a Standalone Market."

Feedback from market participants suggested that a reclassification to Frontier Markets would not properly recognise the depth of the markets problems.

It expects to proceed with the proposed reclassification unless the consultation identifies clear evidence of material improvements in market governance and functioning to warrant reconsideration.

MSCI will give its final decision by end of June 2027 and will take feedback till April 2027.