Indonesian stock market recovers, but ownership structure and MSCI doubts persist

The Jakarta Composite Index recovered some of its sharp two-day decline of nearly 15% seen since 1989, with an increase of up to 5%. Despite this recovery, Indonesia remains the world's worst-performing stock exchange. Following a meeting between exchange officials and MSCI representatives, the Indonesia Stock Exchange announced that it will exclude companies with excessively concentrated ownership structures from reference index calculations.

Jeffrey Hendrik, CEO of the Indonesia Stock Exchange, stated that these stocks account for approximately 18% of the JCI index's weight and that the timeline for their exclusion from the index will be announced soon. While the shares will continue to trade normally, their price movements will no longer affect the index. There are approximately 80 companies on the officials' list of highly concentrated stocks. Citigroup analyst Ferry Wong stated that the real test will be whether this practice can be credibly extended to the entire universe.

On Friday, MSCI announced that it is considering downgrading Indonesia from "emerging market" status to "standalone market" status due to opaque shareholder structures and coordinated trading activities. Opaque rules and low minimum free-float requirements in the country continue to be a source of long-standing concern for investors.