Indonesian stocks have tumbled approximately 41 per cent this year as anxiety grows over a potential reclassification by index compiler MSCI, wiping billions from the fortunes of the nation’s wealthiest tycoons and triggering an urgent regulatory response.
The capital market turmoil began when Morgan Stanley Capital International warned earlier this year that Indonesia faced a potential downgrade from its emerging-market status. The pressure intensified when MSCI proposed moving the country directly to a standalone market status due to persistent concerns regarding opaque shareholding structures and coordinated trading practices, according to reports by Reuters.
The downgrade warnings triggered Indonesia’s deepest-ever two-day stock selloff on October 16 and 19, sending the main Jakarta index to its lowest point since 2020. For the year, the benchmark index has fallen about 40 per cent, representing the weakest performance among major global stock indices, as noted by BigGo Finance.
Billionaires Lose Billions Under OJK Penalties
Energy and petrochemical magnate Prajogo Pangestu alongside four other elite Indonesian tycoons and their relatives have shed roughly $57 billion since MSCI’s initial January warning, based on figures provided by the Bloomberg Billionaires Index and highlighted by Billionaires.africa. Prajogo’s net worth dropped more than 60% to about $15 billion.
Indonesia’s Financial Services Authority—commonly referred to as OJK—responded to the ongoing scrutiny by levying unprecedented penalties totaling 2.1 trillion rupiah regarding transactions involving shares of three distinct firms, with two of those entities having ties to Prajogo, as detailed by VnExpress International. The regulator stated that parties connected to controlling owners took large allocations in initial public offerings of Barito Renewables and Petrindo while concealing their identities.
Other prominent business leaders also absorbed heavy losses, including coal billionaire Low Tuck Kwong, whose fortune more than halved to roughly $10.5 billion after he and his daughter sold a 30.25% stake in Bayan Resources.
Prabowo Administration Pushes Back Against MSCI
President Prabowo Subianto accused MSCI of trying to intimidate Indonesia, Yahoo Finance noted, as his administration pushed back against the index provider’s pressure.
Hashim Djojohadikusumo, brother of President Prabowo and special envoy alongside his role as advisory board chairman of the Indonesian Chamber of Commerce and Industry (Kadin), stressed the gravity of the situation at a business gathering in Jakarta. Hashim urged business leaders to halt local coordinated trading practices known locally as saham gorengan, warning of severe macroeconomic consequences.
Please stop deep frying stocks immediately because the government intends to take firm action
Hashim Djojohadikusumo, Special envoy and Kadin advisory board chairman
Roughly 32.7 million Indonesian citizens holding brokerage accounts are deeply dissatisfied with falling portfolio values, as reported by Malay Mail, with Hashim adding that uncontained capital flight could weaken the rupiah further and create a catastrophe for the wider economy.
Bank Indonesia Governor Damayanti characterized the turbulence as a temporary disruption during a meeting of business figures in Jakarta.
The situation surrounding MSCI is a short-term shock, and I expect we can recover once the issues causing the concerns are resolved
Damayanti, Bank Indonesia Governor
Indonesia Implements Strict Exchange Reforms
The Indonesia Stock Exchange announced plans to exclude companies with tightly concentrated ownership structures from its main Jakarta index starting November 2, affecting approximately a fifth of the index’s total market value, according to VnExpress, to satisfy international standards and avert a demotion to standalone status.
Capital market authorities are expanding independent oversight. IDX chief Jeffrey Hendrik announced that the exchange plans to include independent representatives, such as academics, on a committee determining concentrated ownership stocks, The Diplomat reported.
The OJK’s capital market supervisor emphasized the regulatory stance on rigorous enforcement.
We encourage the IDX to strengthen the mechanism and methodology of trading supervision, including its capacity to identify patterns of irregular transactions, detect coordinated trading and strengthen the mechanism to respond to such events
Hasan Fawzi, Financial regulator’s capital market supervisor
The formal consultation period for MSCI’s proposed reclassification runs through April 2027, with a final decision targeted for release no later than June 30, 2027, as documented by Voi. Whether Indonesian authorities can successfully restore regulatory credibility and regain institutional confidence before the June 30, 2027 deadline remains unconfirmed.
Earlier coverage: Indonesian financial authorities face MSCI downgrade Threat
