Indonesia's Stock Exchange Faces 27% Risk of MSCI Downgrade

TEMPO.CO, Jakarta - Managing Director of PT Samuel Tumbuh Bersama, Tae Yong Shim, stated that there is a possibility that the global index provider, Morgan Stanley Capital International (MSCI), will downgrade Indonesia's stock exchange status to a frontier market. However, the likelihood is small.

MSCI's assessment had raised concerns in the Indonesian stock market about a potential downgrade from an emerging market to a frontier market. Shim expressed, "So, our chances are only 27 percent. In my opinion, the likelihood is very low," during the Media Connect Samuel Sekuritas Indonesia event in Jakarta on Friday, July 3, 2026.

The projection refers to the global market prediction platform, Polymarket. Nevertheless, he personally argued that Indonesia's probability of a downgrade could be even lower. "I think the probability of Indonesia being downgraded to frontier market status is less than 10 percent, precisely 9 percent, and the issue related to MSCI has been well handled," he said.

Prior to the Market Classification Review released on June 24, 2026, MSCI had decided to maintain Indonesia's stock exchange status at the emerging market level. However, MSCI has provided a review assessment deadline of November 2026 before making further decisions.

The issue of transparency in Indonesian stock ownership has indeed been scrutinized by global institutions, leading MSCI to temporarily freeze its assessment of Indonesian stock indexes.

According to Shim, MSCI's assessment of Indonesia has been too harsh. The June release indicated that the assessment was not entirely safe. However, the Indonesian government and the Self Regulatory Organization (SRO) have made efforts to reform the capital market. These include releasing provisions for disclosing stock ownership data above 1 percent and establishing a minimum free float rule of at least 15 percent.

Shim also believed that the minimum percentage of free float shares was too high. He compared it to Elon Musk's company, SpaceX, which only offers 3 percent of its total shares to the public. "Its free float is only 3 percent. Will Elon Musk's SpaceX be listed in Indonesia? It's not possible, right? Because our minimum is 15 percent," he said.

Earlier, the Financial Services Authority (OJK) promised to strengthen capital market reforms in response to the MSCI review. The Executive Head of Market Supervision, Financial Derivatives, and Carbon Exchange at OJK, Hasan Fawzi, appreciated MSCI's decision to continue monitoring and evaluating Indonesia's capital market reform agenda.

Hasan stated that OJK and the SRO of the capital market will continue to communicate reform efforts to global index providers and investors. "We believe that Indonesia's capital market is still very prospective and attractive, both for domestic and global investors. This is supported by a well-maintained domestic economic fundamental, a continuously growing investor base, competitive stock valuations, and generally positive fundamental performance of issuers," he said.

Anastasya Lavenia contributed to this article

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