MSCI Delays High-Stakes Indonesia Review After Downgrade Fears Spooked InvestorsAI Quick Read(Bloomberg) -- MSCI Inc. will extend the review period for Indonesia’s stock market status to June as it assesses the impact of recent regulatory reforms.
The index compiler said it’s reviewing the scope, consistency and effectiveness of new data sources and measures related to investability and shares available for public trading, according to a statement dated late Monday.
As a result of the one-month extension, previously announced measures such as freezing index additions will continue. MSCI said it will remove securities flagged under Indonesia’s new high shareholding concentration framework and use new disclosure data to adjust free-float estimates.
“MSCI is effectively keeping Indonesia in a holding pattern, which means no incremental passive inflows for now,” said Mohit Mirpuri, a partner at SGMC Capital Pte., adding that the update is largely neutral, with a slight negative bias in the near term.
MSCI’s announcement comes amid investor angst that’s been brewing for months after it warned of a possible downgrade to frontier status due to investability concerns and limited free float. The warning had triggered a market rout, resignations of key market officials and a series of market reforms.
The measures include doubling minimum float levels to 15%, with a phase-in period of up to three years for some companies. The Indonesia Stock Exchange has also named nine firms with more than 95% of shares held by a small group of investors to boost ownership-transparency standards. Companies identified include tycoon-linked and MSCI Indonesia Index constituents PT Barito Renewables Energy and PT Dian Swastatika Sentosa, sending the stocks down.
“This may look like a relief, but it also means that MSCI is asking if that’s all authorities are going to do. I guess MSCI wants the regulator to fast track free float reforms,” said John Foo, a founder of Valverde Investment Partners.
Uncertainty ahead of the May decision had pushed many market participants to the sidelines, with investors citing the overhang from potential outflows. Coupled with concerns over policy direction and the fallout from the Iran war, the benchmark Jakarta Composite Index had tumbled to become the world’s worst-performing major gauge this year.
“Investors view the postponement as a temporary reprieve and that Indonesia is still on ‘probation,’” said Francis Tan, Asia chief strategist at Indosuez Wealth in Singapore. While near-term uncertainties persist, “longer term, I believe this provides more time for policymakers and the ‘path to redemption’ still remains open.”
--With assistance from Jackie Edwards.
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