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Index provider FTSE Russell has postponed a review of Indonesia over uncertainty in determining the free float of stocks, adding to warnings on “investability” in south-east Asia’s largest economy.
FTSE will push back to June a review that was originally scheduled for March, it said in a Monday statement. Indonesian stocks will not be added to or deleted from any FTSE index, and weighting changes will also be halted.
The index provider said its decision was made based on “feedback from FTSE Russell’s External Advisory Committees” and “uncertainty in determining the accurate free-float percentages of Indonesian securities”.
The announcement came nearly two weeks after another index provider, MSCI, said it could downgrade Indonesia from an emerging to a frontier market, pointing to “fundamental investability issues” and “opacity in shareholding structures”.
The warning, along with a Goldman Sachs rating cut, triggered a sharp sell-off in equities and rattled investors who were already on edge over President Prabowo Subianto’s spending and economic plans.
Indonesia has long faced questions around concentrated ownership of listed companies, especially for conglomerates controlled by billionaires. Shares in companies with low free floats can fluctuate wildly due to thin trading.
Since the MSCI warning, Indonesia has promised to address transparency concerns and to double the free-float requirement for listed companies to 15 per cent.
Indonesia’s stock exchange said it would discuss its reform pledges with MSCI this week after an initial meeting last week. The Jakarta Composite index rose 1 per cent on Tuesday.
Moody’s on Friday lowered its credit rating outlook for Indonesia to “negative” from “stable”, citing policy uncertainty under Prabowo and weak governance.
Since taking office in October 2024, Prabowo has pursued an aggressive pro-growth approach in an attempt to expand economic growth to 8 per cent from the current 5 per cent.
The policies have raised concerns among investors about fiscal discipline.
Last year, Prabowo sacked finance minister Sri Mulyani Indrawati, who was known for her insistence on fiscal prudence, and replaced her with Purbaya Yudhi Sadewa, an economist who once called the IMF “stupid”.
He appointed his nephew in January as one of the central bank’s deputy governors, a move seen as steering the bank towards a pro-growth approach and away from rupiah strength.