The resignation of the Indonesia Stock Exchange’s chief executive marked the first tangible consequence of MSCI Inc.’s reform demands, as policymakers rushed to roll out measures aimed at averting a downgrade and restoring confidence.
Within hours of Iman Rachman stepping down on Friday, officials said they were preparing additional steps to support the market, including changes to the exchange’s shareholding structure and higher caps on insurers’ capital-market allocations.
The moves capped a volatile week for Indonesian assets after the index compiler flagged concerns about transparency in Southeast Asia’s biggest market, sending benchmark stocks to their worst two-day rout in nearly three decades before regulators stepped in. The Jakarta Composite Index closed 1.2% higher.
“This should be seen less as blame and more as a reset,” said Mohit Mirpuri, senior partner at SGMC Capital Pte. “Periods of stress often accelerate change, and this opens the door for fresh leadership with a clear mandate to raise standards, improve market structure and reinforce investor confidence.”
Sentiment had already begun to recover after regulators on Thursday outlined reform measures, including doubling minimum free float—the number of shares available for public trading—to 15% starting next month and possible market involvement by sovereign wealth fund Danantara. The efforts reflect a push by authorities to meet MSCI’s demands for greater transparency—failure to do so by May risk cutting Indonesia’s index weighting and even a downgrade to frontier status.
HSBC Holdings Plc became the latest bank to downgrade Indonesian equities on concerns over growth. Goldman Sachs Group Inc. and UBS Group AG have both downgraded the market, with the former citing the risk of more than $13 billion in outflows triggered under an extreme scenario.
This week’s episode has revived doubts over Indonesia’s financial markets, long viewed as a beneficiary of the nation’s rapid economic rise. Growing investor angst over public finances, the sudden departure of its finance minister and a widening fiscal deficit have already driven many investors to pull back. Global funds had dumped Indonesian bonds from September to November, before returning in the final month of 2025.
At the heart of concerns is the low free float of Indonesian equities, given the country’s biggest companies are thinly traded and controlled by a handful of wealthy individuals—a structure that investors say distorts the index and risks manipulation. The issue has been a point of contention for years, with investors arguing that such low liquidity in certain shares makes large portions of the market uninvestable and untrackable.
Exchange officials have already tried to incentivize market participants. Rachman, who was appointed his position as CEO less than four years ago, had pushed for extended trading hours and introduce short selling as a way to boost liquidity, though success has been limited.
Currently, MSCI does not have a minimum free float requirement for a country’s market classification, which depends on factors such as accessibility and the economic development. However, the index compiler does require a free float of 15% over a period of time for a security to be included in its investable emerging-market universe, with some exceptions.
In a statement earlier this week, MSCI raised worries over “opacity in shareholding structures and concerns about possible coordinated trading behavior” in Indonesia. It said it needs more granular and reliable information, including stronger monitoring, to support a better assessment of free float and investability across securities.
Many investors remain on edge for whether regulators will be able to do enough to satisfy the index compiler’s demands. “The reforms outlined are directionally positive, but execution and the appointment of a credible successor will be key to determining whether these concerns fully dissipate,” said Gary Tan, a portfolio manager at Allspring Global Investments.
So far this week, global funds offloaded a net $739 million dollar worth of stocks through Thursday, on track for the largest weekly outflow since mid-April.
