Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Indonesian shares have plunged after index provider MSCI warned about the market’s investability and a potential downgrade.
The Jakarta Composite index opened 7 per cent lower on Wednesday before paring some losses. It was recently down 5.3 per cent.
MSCI on Tuesday said it had concluded consultations on Indonesian securities’ free-float assessment and found persisting “fundamental investability issues”.
The index compiler said it would stop making changes to Indonesian securities in its gauges and freeze the number of shares available to international investors to “mitigate index turnover and investability risks”.
It cited “opacity in shareholding structures and concerns about possible co-ordinated trading behaviour that undermines proper price formation”.
MSCI said it could downgrade its classification for Indonesia from emerging to frontier market if no resolution is made by May. The Indonesia Stock Exchange said it would continue discussions with MSCI.
The latest bout of volatility risks triggering a circuit breaker. The last trading halt took place in March last year, when the Jakarta Composite dropped as much as 7.1 per cent to its lowest level since 2021.
