Global index provider MSCI said it will cut six companies from its Indonesia index at the end of May as it pushes for reforms in a market it has criticised for lacking transparency, sending their shares tumbling on Wednesday.
Two of the six had been flagged by Indonesian authorities for having concentrated ownership, a focus of an MSCI review into Indonesia’s market due to conclude in June.
MSCI highlighted transparency issues in Indonesian equities in January, sparking a market rout on fears of a downgrade to “frontier” status, which led authorities to step up efforts on market integrity reforms.
On Wednesday, Jakarta’s main stock index dropped 1.98% to close at its lowest in over a year on MSCI’s announcement, although investors and the government said it had been largely anticipated.
Market participants said the culling could pave the way for MSCI to soon lift a block on adding Indonesian companies to its indexes, citing investor-friendly reforms authorities have taken.
“We see a high probability that Indonesia avoids a downgrade to Frontier Market status,” said Ari Jahja, head of Indonesia research at Macquarie Capital.
Gary Tan, a portfolio manager at Allspring Global Investments, said the rebalancing from MSCI was a “constructive step in clearing out weaker governance names, supporting Indonesia’s push to improve overall market quality”.
“We expect continued pressure into the May 29 rebalance and early June as passive funds adjust,” said Tan, who remains selectively positioned in the market, preferring higher quality and liquid names.
After the market close, index provider FTSE Russell also said it will delete Indonesian shares with high shareholding concentration, effective June 22.
Foreign investors have sold about $2.2 billion worth of Indonesian stocks this year, exchange data showed. Goldman Sachs estimates an outflow of about $1.6 billion due to the rebalancing.
Tycoon-linked companies affected
MSCI removed Amman Mineral International, Chandra Asri Pacific, Dian Swastatika Sentosa, Barito Renewables Energy, Petrindo Jaya Kreasi and Sumber Alfaria Trijaya from its Indonesia Index, while another 13 companies were dropped from its small-cap index list.
Shares in most of the affected companies tumbled around 10%. Sumber Alfaria Trijaya was an exception, unchanged by closing time, as the mini market operator was moved to MSCI’s Indonesia small-cap index.
The selling was concentrated in tightly-held names with low free floats that lack active foreign ownership, Allspring’s Tan said.
Amman Mineral, Barito Renewables and Dian Swastatika were in the top 10 constituents of Indonesia’s stock exchange as of March 2026.
The chief capital market supervisor at Indonesia’s Financial Services Authority (OJK), Hasan Fawzi, said market reactions were within normal ranges, suggesting no panic selling of shares.
MSCI’s decision reflected reform measures launched by Indonesia since February, he said, which included requiring more details on stock ownership and a higher level of freely tradeable shares.
“Of course, bolder reforms on market integrity, with a goal of making our market more credible and investable … will be continued in the medium to long term,” Fawzi said.
Barito Renewables and Dian Swastatika were among those previously flagged by authorities for having highly concentrated ownership structures.
Indonesian business magnate Prajogo Pangestu has controlling stakes in Chandra Asri, Barito Renewables and Petrindo Jaya Kreasi, while Dian Swastatika is part of the Sinar Mas Group, one of the country’s largest conglomerates, owned by the billionaire Widjaja family.
The companies did not immediately respond to Reuters e-mails seeking comment.
The small-cap companies affected include state miner Aneka Tambang, several palm oil companies such as conglomerate Astra Group’s Astra Agro Lestari, and Sinar Mas Group’s real estate firm Bumi Serpong Damai.
Reuters
