Media365
Indonesia’s capital markets have come under renewed pressure after S&P Dow Jones Indices (S&P DJI) warned that the country could face a downgrade from emerging market status if concerns over stock ownership transparency are not adequately addressed.
The warning follows similar concerns raised by global index provider MSCI earlier this year, adding to investor anxiety over Southeast Asia’s largest economy at a time when its stock market has already suffered one of the steepest declines globally.
S&P DJI said it has placed Indonesia, along with Turkey, on a watch list for potential inclusion in its next market classification review. Both countries are currently classified as emerging markets.
The index provider said it will continue monitoring efforts by the Indonesia Stock Exchange (IDX) and regulators to improve transparency in share ownership and disclosure standards.
“If circumstances worsen, S&P DJI may consider implementing special treatment for Indonesian securities,” the index provider said in a statement. It added that if the issues remain unresolved one year after any such measures are introduced, Indonesia’s market classification would be reassessed during its next annual review.
The latest warning comes after MSCI placed Indonesia under review in January over concerns that concentrated and opaque ownership structures in listed companies were undermining price discovery and market accessibility for investors.
The uncertainty has taken a heavy toll on Indonesian equities. The benchmark Jakarta Composite Index has fallen more than 30 per cent so far this year, making it one of the world’s worst-performing major stock markets in 2026 as foreign investors pulled billions of dollars from local equities.
MSCI last month extended its review until November, giving Indonesian authorities more time to implement reforms aimed at improving market transparency. While the index provider described the changes as “a step in the right direction”, it said consistent implementation and sustained improvement would be key before a final decision is made.
In response to the scrutiny, Indonesian regulators have introduced several reforms.
The Indonesia Stock Exchange has doubled the minimum free-float requirement for listed companies from 7.5 per cent to 15 per cent, allowing firms up to three years to meet the new threshold. Authorities have also tightened shareholder disclosure rules by lowering the reporting threshold for ownership stakes from 5 per cent to 1 per cent.
S&P DJI said it would continue assessing the effectiveness of these measures, particularly their impact on stock ownership transparency and market liquidity.
The concerns over market structure have been compounded by broader economic worries. Investors have become increasingly cautious over President Prabowo Subianto’s expansive spending plans and greater state involvement in the economy, raising questions about fiscal discipline and policy predictability.
The Indonesian rupiah has also come under pressure, losing around 8 per cent against the US dollar this year and trading close to record lows.
Adding to the challenges, Moody’s Ratings and Fitch Ratings earlier this year revised the outlook on Indonesia’s sovereign credit rating to negative, citing concerns over policy credibility and fiscal management.
A downgrade from emerging market status would carry significant implications for Indonesia. Many global investment funds track benchmark indices and allocate capital accordingly. Losing its emerging market classification could trigger further passive fund outflows, reduce foreign investment and weaken the country’s appeal among international institutional investors.
