Indonesia will press on with reforms of its capital markets and go after market manipulators with the full force of the law well ahead of a May deadline set by leading index MSCI, the country’s top economic minister, Airlangga Hartarto, has vowed.
A massive sell-off last Wednesday prompted the government to act, as investors exited after MSCI said it would stop making adjustments to Indonesian stocks, citing a lack of transparency in shareholding structures and concerns over coordinated trading actions.
It warned it would reclassify Indonesia from an emerging to frontier market status by May if it did not see improvements.
In an interview on Tuesday, Airlangga, the coordinating minister for economic affairs, told This Week in Asia: “The government has an earlier deadline than what MSCI is asking. The government is not acting merely because of MSCI.
“The government is acting because it is already mandated by the law, but it hasn’t been implemented … This is not only about the capital market. Market integrity is the proxy of the whole economy, that’s why the government made swift action.”
On Sunday, the country announced a series of reforms, including plans to double the minimum free float to 15 per cent, potentially getting sovereign wealth fund Danantara to help stabilise markets, and allowing pension and insurance funds to increase capital market exposure.
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