MSCI still concerned about Indonesian stock-market transparency
Morning rush hour in Jakarta. Indonesia’s Jakarta Composite index faces a few blows in 2022, but was the best-performing major Asia-Pacific index of the year as of Friday’s close.
Mr. Ismoyo | AFP| Getty Images
MSCI has warned of transparency issues in the Indonesian market, just months after an earlier warning sent the country’s shares roiling.
The index provider said opaque shareholding structures and signs of coordinated trading activity undermined the ability of international investors to accurately value the company’s publicly traded shares and rely on market prices. The Jakarta Composite Index erased early gains on Friday and is down almost 30% since the beginning of the year.
MSCI first expressed concerns in its report published in January, stating that Indonesia could be demoted from emerging market status. In its annual Global Market Accessibility Review published on Thursday, MSCI downgraded Indonesia’s Information Flow rating, citing ongoing issues with ownership transparency and price formation. The same measure was interrupted in Türkiye for similar reasons.
Investors are expressing concern about sharp movements in some small-cap Indonesian stocks and concentrated ownership structures. The report comes at a time when the rupiah is at a record low against the dollar, questions about the country’s financial health are widespread and problems with capital outflows are rife. Bank Indonesia raised rates in a surprise move last week.
“Accessibility concerns have arisen from ongoing transparency in shareholding structures and signs of coordinated trading behavior that undermine fair pricing,” MSCI said in its report. The statement was included.
The global financial services firm added that such issues “significantly limit the ability of international institutional investors to evaluate true free float and rely on observed market prices for portfolio construction and index replication.”
