Indonesia Sets Out Reforms as MSCI Considers Index Reclassification

Indonesia’s financial regulator has outlined eight capital-market reforms as MSCI considers reclassifying its Indonesia indexes, putting transparency and ownership rules at the center of a review that could change their global market classification.

The Indonesia Financial Services Authority (OJK), the country’s financial regulator, said Oct. 21 that its priorities focus on transparency, liquidity, governance and enforcement. OJK plans to gradually raise the minimum free-float requirement to 15%, expand investor classifications from nine to 39, require disclosure of shareholdings above 1% and publish a list of stocks with highly concentrated ownership.

“Investor confidence must be built through tangible actions, not merely statements,” OJK Chairperson Friderica Widyasari Dewi said.

MSCI’s Oct. 15 proposal to reclassify its Indonesia indexes would move them from Emerging Market to Standalone Market status. The consultation remains open, and no reclassification has taken effect. Standalone Market indexes sit outside MSCI’s Emerging Markets and Frontier Markets indexes.

The proposal follows earlier warnings that a frontier-market review was possible. After its June review, OJK said Indonesia’s emerging-market status remained in place. In January, MSCI had warned that insufficient transparency improvements by May could prompt a reassessment, including a possible move to frontier status. In June, it said it could consider a frontier-market consultation if progress was not evident by its November review.

MSCI said market participants had raised concerns about opaque shareholding structures and suspected coordinated trading. It also said it had not seen consistent progress or meaningful enforcement. In its June review, MSCI acknowledged reforms announced by Indonesian authorities but said investors needed to see them implemented consistently and produce sustained effects.

While the consultation is pending, MSCI will maintain a freeze on certain index changes for Indonesian securities. The freeze covers increases to Foreign Inclusion Factors or share counts, additions to the MSCI Indonesia Investable Market Index, and moves upward between size segments.

MSCI will accept feedback through April 30, 2027, and announce its decision on or before June 30, 2027. It expects to proceed with the proposed reclassification unless the consultation shows clear evidence of material improvement in market governance and functioning.