Indonesia's stock benchmark falls 1 to 8,156.47

Indonesia's stock benchmark falls 1 to 8,156.47

Indonesia’s Stock Benchmark Continues Decline Amid Regulatory and Market Concerns

The Jakarta Composite Index fell 1% to 8,316.25 on February 24, 2026, extending a broader slump driven by persistent concerns over market transparency and regulatory oversight. The decline follows a sharp two-day drop of nearly 8% in late January, triggered by MSCI's warning that Indonesia's equities could be reclassified from emerging to frontier market status due to "fundamental investability issues," including low free float and opaque ownership structures.

Goldman Sachs analysts downgraded Indonesian stocks to "underweight," estimating potential outflows exceeding $13 billion if MSCI implements the reclassification. Passive funds tracking MSCI indices could sell up to $7.8 billion, while additional losses may arise from reassessments by FTSE Russell. The market's vulnerability to manipulation has also drawn scrutiny, with reports of "pump and dump" schemes exploiting retail investors through artificially inflated stock prices.

Regulatory reforms are underway to address these challenges. The government has pledged to double the free-float requirement for listed companies to 15%, enhance market surveillance using artificial intelligence, and demutualize the Indonesia Stock Exchange (IDX) to eliminate conflicts of interest. These measures aim to restore investor confidence after the resignations of top officials at the Financial Services Authority (OJK) and IDX in early February, following the $80 billion market rout.

Despite short-term volatility, officials emphasize that Indonesia's economic fundamentals remain stable. National Economic Council chairman Luhut Pandjaitan stated reforms will prioritize transparency and governance, including stricter oversight of unusual trading activities and shareholder affiliations. However, investors remain cautious, with foreign outflows reaching $645 million during the January sell-off, reflecting ongoing skepticism about regulatory effectiveness.

The path to recovery hinges on the successful implementation of these reforms and addressing systemic issues that have eroded trust in Indonesia's capital markets.