January 31, 2026 | 02:45 pm
TEMPO.CO, Jakarta - The Indonesia Stock Exchange Composite Index (IHSG) plunged sharply following a warning from Morgan Stanley Capital International (MSCI) about transparency and structural issues in the Indonesian capital market. This article breaks down what happened, why it matters, and the government’s response.
MSCI Freezes Index Changes
On Tuesday, January 27, 2026, MSCI announced a temporary freeze on certain index changes for Indonesian securities, including updates planned for February 2026 and corporate events.
“This step is intended to reduce the risks associated with index turnover and investment, while allowing relevant authorities time to implement meaningful transparency improvements,” MSCI said.
The firm froze all Foreign Inclusion Factor (FIF) increases and share count adjustments, while halting new stock additions to MSCI Investable Market Indexes (IMI). It also suspended upward migrations between index segments, such as from small-cap to standard.
MSCI flagged key concerns:
Lack of transparency in shareholding structures and free float (shares available for public trading)
Risk of coordinated trading affecting fair price formation
MSCI warned that if transparency improvements are not achieved by May 2026, it may reassess Indonesia’s market accessibility, potentially lowering the weight of Indonesian securities in the MSCI Emerging Markets Indexes and even downgrading the country from an emerging market to a frontier market.
Market Reaction: Panic Selling
Following MSCI’s announcement, the IHSG dropped from 8,975.33 to 8,320.56 on January 27 and continued to slide to 8,232.20 on January 29. The exchange implemented two trading halts on January 28 and one on January 29 after losses approached 8 percent.
Indonesia Stock Exchange (IDX) President Director Iman Rachman said investors reacted with panic selling. He noted that the IDX, in coordination with the Indonesia Central Securities Depository (KSEI) and the Financial Services Authority (OJK), is taking steps to comply with MSCI’s requirements:
“To translate MSCI’s message, there will be no addition or removal of Indonesian companies in MSCI,” Rachman said.
IDX and KSEI previously met with MSCI in the U.S. in mid-January to discuss data processing and compliance.
Government Steps to Stabilize the Market
Indonesia's Coordinating Minister for Economic Affairs Airlangga Hartarto outlined several measures to address the issues highlighted by MSCI:
Increasing free float: OJK and IDX are expected to issue regulations to raise the free float from 7.5 percent to 15 percent, in line with MSCI expectations.
Accelerating demutualization: The IDX will complete its structural transformation in the first half of 2026 to improve governance, professional management, and reduce conflicts of interest between exchange management and members.
Raising pension and insurance fund investment limits: Allocation in the capital market will increase from 8 percent to 20 percent, with priority given to high-capitalization, liquid, and fundamentally strong LQ45 stocks.
Leadership Shake-Up
On Friday, January 30, 2026, Iman Rachman resigned as IDX President Director, citing responsibility for the market’s stability.
Following his departure, four senior OJK officials also submitted resignations:
Mahendra Siregar, Chairperson of the Board of Commissioners
Mirza Adityaswara, Vice Chairperson
Inarno Djajadi, Executive Head of Capital Market, Derivatives, and Carbon Market Supervision
I.B. Aditya Jayaantara, Deputy Commissioner for Issuer Supervision, Securities Transactions, Special Audits, Derivatives, and Carbon Market
As of Friday night, no acting chair had been appointed to replace Mahendra Siregar. OJK spokesperson M. Ismail Riyadi emphasized that the resignations do not affect OJK’s ongoing duties, functions, or authority in regulating, supervising, and maintaining stability across Indonesia’s financial sector.
Read: IDX Chief's Resignation Is a 'Buy-the-Dip' Moment for Investors, Says Purbaya
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