ASEAN Beat | Economy | Southeast Asia

Indonesia Announces New Measures to Improve Stock Market Transparency

The global index provider MSCI has threatened to downgrade the country to “standalone market” status, potentially triggering billions of dollars in capital outflows.

Indonesia yesterday introduced a host of additional measures to address stock market manipulation, in order to stave off a potential downgrade of the country’s investment status by the global index provider MSCI.

On October 16, MSCI announced that it had launched “a consultation on a proposal to reclassify the MSCI Indonesia Indexes from Emerging Market to Standalone Market status” due to its lack of action to increase the transparency of its stock market. The announcement led to an immediate plunge in the Indonesian stock market, which shed 15 percent of its value over two days of trading.

Amid a defiant response from President Prabowo Subianto, who last week accused MSCI of trying to “intimidate” Indonesia, Indonesian officials have promised action to address the index provider’s concerns. Last week, the Indonesia Stock Exchange (IDX) said that it would exclude stocks with high shareholding concentrations from its main Jakarta index starting on November 2.

At a press conference yesterday, IDX chief Jeffrey Hendrik said it plans to expand the membership of a committee that will come up with a list of stocks with high shareholder concentration to include independent parties, Reuters reported. These could include a number of Indonesian academics as well as F. Taylor Chapman, an American businessman currently serving on the board of the new Indonesian state investment fund Danantara, who will act as a representative of foreign investors.

Hendrik said that the IDX also plans to launch investigations when it detects possible coordinated trading aimed at manipulating share prices. It will also freeze suspicious investor accounts.

“We encourage the IDX to strengthen the mechanism and methodology of trading supervision, including its capacity to identify........

© The Diplomat