SINGAPORE: The head of Indonesia’s stock exchange Iman Rachman has resigned, the exchange said on Friday (Jan 30), as the consequences of a warning from index provider MSCI of a possible downgrade that triggered a more than US$80 billion market rout continue to reverberate.
The benchmark Jakarta Composite Index pared gains to trade flat on Friday, a day after Indonesian authorities announced a slate of measures to ease investor worries and address concerns from MSCI. The index dropped more than 8 per cent on Wednesday and Thursday, its steepest two-day decline since April.
The CEO of the Indonesia Stock Exchange resigned to take responsibility for the market conditions, the exchange’s corporate secretary said.
The stock market selloff followed MSCI on Wednesday raising concerns about ownership and trading transparency in Indonesian stocks and warning the market risked a downgrade to frontier status if it failed to resolve the issues.
Foreign capital has flowed out of Indonesia because of concerns about how President Prabowo Subianto is widening the fiscal deficit and ramping up the state’s involvement in financial markets.
The appointment of his nephew, Thomas Djiwandono, to the central bank this month, after last year’s abrupt firing of respected Finance Minister Sri Mulyani Indrawati, has shaken confidence in Prabowo’s fiscal stewardship.
The rupiah fell to a record low of 16,985 to the US dollar last week and was last at 16,800.
Some of the measures announced by Indonesian authorities on Thursday included doubling the free float requirement on listed companies to 15 per cent and checking the affiliations of shareholders with less than 5 per cent ownership.
Indonesian regulators said communications with MSCI had been positive so far and they were awaiting a response to its proposed measures, which they hoped could be implemented soon and the issues resolved by March.
The response appears to have allayed some investor concerns but sentiment remains fragile.
“Policymakers want to fix this,” said Paul Dmitriev, senior analyst and co-portfolio manager at Global X ETFs. “The government has every incentive to fix these issues as systemic outflows would be substantial and could materially impact the market.”
Foreign investors sold around a net US$645 million worth of Indonesia stocks in the two-day selloff, exchange data showed. They had sold US$1 billion of Indonesia shares in 2025.
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