The market index organisation, whose benchmarks are widely used by investors, says that concerns about opaque shareholding structures and “suspected co-ordinated trading” means that it may strip the Asian country of its emerging market status.

Shares in Indonesian equities fell yesterday, adding to recent losses, after MSCI said late last week that it was consulting on a proposal to reclassify the MSCI Indonesia Indexes from “Emerging Market” to “Standalone Market” status. 

The organisation said it will announce its final decision by the end of June 2027 and may provide an interim update on market participant feedback during the consultation period.

The warning has added to losses in Indonesian stocks. The Jakarta Composite Index (JCI/IHSG) is down about 40 to 43 per cent since the start of 2026. The Index was falling weeks before the MSCI announcement, and shares continued to slip after its 15 October announcement. The rupiah, its currency, has depreciated by approximately 8 per cent.

“As part of the June 2026 Market Classification Review, MSCI reported that market participants had raised significant concerns regarding the investability of the Indonesian equity market, including persistent opacity in shareholding structures and suspected coordinated trading behaviour,” MSCI said in a statement. 

“While the Indonesian authorities have announced reforms, including enhanced disclosure of shareholders with ownership above 1 per cent, more granular investor classification disclosure, High Shareholding Concentration (HSC) reporting, and a roadmap towards a minimum free float requirement of 15 per cent, institutional investors have emphasised the need for consistent implementation and evidence of sustained material impact from these announcements,” it said in a statement. 

MSCI indicated in June that 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. 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,” it continued.

The organisation said feedback from market participants suggested that reclassifying Indonesia to Frontier Markets status “would not properly recognise the depth of the market problems.” 

“MSCI expects to proceed with the proposed reclassification unless the consultation identifies clear evidence of material improvements in market governance and functioning to warrant reconsideration,” it said. 

The organisation said it continues to apply the existing freeze on certain index-related changes for Indonesian securities resulting from index reviews or corporate events until further notice. 

The move, if MSCI acts, will be a blow to one of the largest Southeast Asian economies. Indonesia’s economy is about $1.4 to $1.5 trillion in nominal terms, making it about the 17th largest in the world. It has expanded by about 5 per cent per annum since the pandemic.