Jakarta market curbs remain in place
MSCI said on Monday that for the May review it will preserve the current restrictions on Indonesian stocks included in its global indexes as it continues to evaluate recent transparency reforms announced by Indonesian authorities. The decision means the index provider will not advance measures that would increase foreign inclusion factors or share counts for Indonesian securities at this time.
Background to the decision
In late January, MSCI warned that Indonesia - a G20 economy with an approximate market size of $1.4 trillion - faced the possibility of being downgraded from emerging market to frontier market classification on account of concerns over ownership and trading transparency. That advisory wiped about $120 billion of market value from Jakarta's exchange.
Reforms under examination
Indonesia implemented a set of stock market reforms ahead of the May review deadline. Among the steps cited by MSCI are revisions to shareholder disclosure rules and a plan to raise minimum free float requirements. MSCI said it is now examining the scope, consistency and effectiveness of the new data sources and regulatory measures that have been announced.
Index consequences for May
For the May review, MSCI will keep in place a freeze on upward adjustments to foreign inclusion factors and on increases to share counts for Indonesian listings. The provider will also refrain from adding Indonesian stocks to its investable market indexes and will not permit upward migrations across size segments - including moves from small-cap to standard indexes.
Looking ahead
MSCI said it will provide additional information in a June review as it continues to assess the effectiveness of the reforms and the new information sources. Until that follow-up, the constraints announced for May will remain active.