Iman Rachman, the chief executive officer of the Indonesia Stock Exchange (IDX), announced his resignation on Friday after the stock market experienced a sharp decline over a two-day period, losing $84 billion in value. This sudden downturn was triggered by a warning from MSCI Inc. regarding a potential downgrade of Indonesia from “emerging market” to “frontier market” status.
In an official release, the IDX stated that Rachman stepped down in light of the recent market conditions, although details surrounding his decision were not elaborated upon. During a press conference, Rachman expressed hope that his resignation would lead to improvements within the capital market, stating, “I hope this is the best decision for the capital market. May my resignation lead to improvements in our capital market.” He noted a positive opening for the index on Friday, citing optimism for recovery in the upcoming days.
The triggering factor for the market’s turmoil was MSCI’s warning, which highlighted concerns over trading transparency in Indonesia. The organization pointed out that investors continue to face fundamental issues related to investability, with ongoing opacity in shareholding structures and concerns about potential coordinated trading behavior, which undermines proper price formation.
Despite the turbulence, the Jakarta Composite index saw a rebound of 1.18% on Friday after significant losses of 7.35% on Wednesday and a further 1.06% on Thursday. In response to MSCI’s concerns, Indonesia’s financial regulator announced plans to double the free float requirement for listed companies from 7.5% to 15%. This move is aimed at enhancing transparency within the market.
The IDX acknowledged MSCI’s feedback as a crucial element in its efforts to improve the credibility of Indonesia’s capital market, stating that it is “fully committed to making our best efforts to increase the weighting of Indonesian equities in the MSCI indices.”
In an interview with CNBC, Pandu Sjahrir, the chief investment officer at the sovereign wealth fund Danatara, characterized the recent market situation as akin to a “good cold plunge,” suggesting that it sparked panic but could ultimately lead to a period of reflection and recovery. He emphasized the need for the market to expand its liquidity from about one billion dollars per day to a range of 8 to 10 times that amount. Sjahrir underscored that transparency is essential to achieving this goal and highlighted the importance of being responsive to market feedback rather than defensive.
