Indonesia tightens stock trading oversight after MSCI downgrade warning

Indonesia announced additional steps against share-price manipulation on October 26 after MSCI warned that concerns over trading transparency could lead to a downgrade. The Indonesia Stock Exchange (IDX) plans to investigate suspected coordinated trading and freeze investor accounts deemed suspicious, exchange chief Jeffrey Hendrik said.

The investigation measure is due to begin in November. Previously, sharp price movements prompted the IDX to alert investors to unusual activity and seek explanations from companies, a process that could also result in temporary trading suspensions.

Hendrik said the exchange also plans to bring independent members onto the committee that identifies shares whose ownership is highly concentrated. The additions would include Indonesian academics and foreign-investor representative F Chapman Taylor, a former Capital Group partner who now advises sovereign wealth fund Danantara. Until now, the committee consisted of capital market authority officials.

The IDX has also said shares identified as having concentrated ownership will be removed from its main Jakarta index beginning November 2. Its current list covers 80 companies.

MSCI said earlier in October that Indonesia could receive standalone status because efforts to curb coordinated trading were insufficient. That warning went further than its January announcement of a possible move to frontier status. Indonesia remains classified as an emerging market.

The warning triggered a record two-day selloff on October 16 and October 19, taking the main index to its lowest level since 2020 before it recovered. At 1:15 p.m. Singapore time on October 26, the index was down around 1%.

Hasan Fawzi, the financial regulator's capital market supervisor, said permission for share buybacks without shareholder-meeting approval had been extended through June 2027. Buybacks must still comply with minimum free-float rules, he said.