Indonesia strengthens measures against stock manipulation after market rout triggered by MSCI

Indonesia has bolstered its efforts to combat stock market manipulation following the MSCI's warning that the country's exchange could be downgraded due to opaque trading practices. The measures include expanding a committee to include independent parties such as Indonesian academics and a representative from foreign investors. Currently, the committee comprises officials from capital market authorities.

The move follows MSCI's earlier warning that it might demote Indonesia's stock exchange to standalone market status, a more severe consequence than the January downgrade to frontier status. The committee's expanded membership aims to enhance the detection of irregular transactions and coordinated trading. The Indonesia Stock Exchange (IDX) also plans to exclude stocks with high shareholding concentrations from its main index starting November 2nd, currently including 80 companies.

The financial regulator's capital market supervisor, Hasan Fawzi, emphasized the importance of strengthening trading supervision mechanisms. The rupiah weakened against the US dollar following the MSCI warning, and the index experienced its deepest-ever two-day selloff on October 16 and 19, its lowest point since 2020. However, the market has since recovered.

Indonesia has also extended a policy allowing share buybacks without a general shareholders' meeting approval until June 2027. The country has been in communication with MSCI and other global index providers to reaffirm its commitment to market reforms. President Prabowo Subianto responded to the downgrade warning, urging Indonesia not to be intimidated, as the nation's investors are described as mature and wise for investing in companies with strong fundamentals.