Indonesia’s Stock Exchange Rises After Sharp Decline
Nevertheless, the country's stock market remains one of the worst-performing globally. The initial decline was the sharpest recorded since 1989.
Indonesia’s Jakarta Composite Index rose by as much as 5% after losing approximately 15% over the previous 2 days. Despite the recovery, the country’s stock market remains one of the worst-performing globally. The initial decline was the sharpest recorded since 1989.
Following a meeting with MSCI representatives, the Indonesia Stock Exchange announced that it would exclude companies with highly concentrated ownership structures from its benchmark index calculations. No specific companies were named.
According to exchange chief executive Jeffrey Hendrik, these stocks account for approximately 18% of the Jakarta Composite Index (JCI). A timeline for their exclusion is expected to be announced soon. Trading in these shares will continue as usual, but their price movements will no longer affect the index.
The lack of transparency in corporate ownership structures and weak requirements for free-float shares have long concerned investors in Indonesia. Many major companies are tightly controlled by controlling shareholders, limiting market liquidity and increasing the risk of sharp price fluctuations.
On Friday, MSCI announced that it was considering downgrading Indonesia’s market status from “emerging market” to “standalone market.” In January, it had warned that Indonesia could be reclassified as a “frontier market.” If the status is downgraded, Indonesia could be grouped with markets such as Lebanon, Palestine and Argentina.