Indonesia shares hit by second trading halt after MSCI flags transparency concerns

[JAKARTA] Indonesian equities extended their sell-off on Thursday (Jan 29), triggering a temporary trading halt for the second consecutive day after MSCI said it had frozen changes to such stocks in its indices due to concerns over limited transparency in ownership structures, as well as potential coordinated trading activity.The Jakarta Composite Index opened 5 per cent down and later fell more than 8 per cent, prompting authorities to halt trading for 30 minutes from 9.26 am local time.Index provider MSCI said it had decided to temporarily freeze certain index changes involving Indonesian stocks, following concerns from global investors over the transparency of ownership data and broader market investibility. It added that it has completed a consultation process related to its assessment of these stocks’ free-float levels.Investors continued to offload Indonesian shares, including that of major banks and other large-cap companies, amid concerns that the market could be downgraded to frontier-market status by MSCI.Foreign investors sold a net 6.2 trillion rupiah (S$467.5 million) of local shares on Wednesday (Jan 28), based on Indonesia Stock Exchange (IDX) data, as the benchmark index posted its steepest single-day decline since April 2025.Ari Jahja and Indra Cahya, analysts at Macquarie, warned that a downgrade could exacerbate capital outflows. “If Indonesia were to be downgraded to frontier-market status under MSCI’s classification, there is a risk of intensifying foreign outflows from equities,” they said.MSCI has said that if sufficient progress is not made by May 2026, Indonesia could be reclassified from an emerging market to a frontier one, reducing its weighting in the provider’s emerging-market indices. Separately, Goldman Sachs Group cut its rating on Indonesian stocks to “underweight”, warning that MSCI’s investibility concerns could trigger more than US$13 billion in outflows if the market were downgraded.In a worst-case scenario, the Wall Street bank estimates that passive funds tracking MSCI indices could sell up to US$7.8 billion worth of Indonesian stocks. Additional outflows of US$5.6 billion could occur if FTSE Russell, another index provider, reassesses Indonesia’s free-float methodology and market status.“We expect further passive selling and regard this development as an overhang that will impede market performance,” Goldman Sachs analysts, led by Timothy Moe, said in a note.Indonesia’s exchange authorities on Wednesday said they would work to address MSCI’s concerns. The bourse said it plans to enhance market data transparency and require listed companies to improve ownership disclosures. IDX also began publishing monthly free-float data on its website on Jan 2.