Move follows $80 billion selloff triggered by MSCI’s transparency concerns; Jakarta unveils reforms to restore investor confidence and avert downgrade risk
The chief executive of the Indonesia Stock Exchange (IDX), Iman Rachman, resigned on Friday after a sharp market selloff wiped out nearly $80 billion in value and shook investor confidence.
His resignation came two days after the benchmark Jakarta Composite Index (JKSE) plunged more than 8 per cent, marking its steepest two-day fall since April.
“I hope this is the best decision for the capital market. May my resignation lead to improvement in our capital market,” Iman told reporters. He added that he hoped the index, which opened higher on Friday, would continue to recover.
What triggered the crash?
The selloff began after global index provider MSCI raised concerns about share ownership patterns and trading transparency in Indonesian stocks. It flagged a possible downgrade of Indonesia to “frontier” market status.
During the two-day fall, foreign investors sold a net $645 million worth of Indonesian shares, according to exchange data. So far in 2026, overseas investors have sold around $1 billion in equities.
On Friday, the market showed signs of stabilising. However, sentiment remains fragile.
Government steps in
Chief economic minister Airlangga Hartarto moved quickly to calm markets. He said the government is committed to improving stock market governance and transparency.
“In response to this situation, the government emphasised its commitment to maintaining stability and credibility,” Airlangga said outside the office of sovereign wealth fund Danantara Indonesia.
He stressed that Indonesia’s economic fundamentals remain strong.
What reforms are planned?
The government and financial regulators have announced a set of measures aimed at improving transparency and strengthening investor confidence in Indonesia’s capital markets.
One key proposal is to double the minimum free float requirement for listed companies to 15 per cent. A higher free float means more shares are available for public trading, which can improve liquidity and reduce the risk of price distortion.
Authorities will also allow pension funds and insurance companies to increase their exposure to the stock market. These institutions will be permitted to invest up to 20 per cent of their capital in equities, up from the current limit of 8 per cent.
In addition, regulators plan to tighten checks on shareholder affiliations, particularly among investors holding less than 5 per cent stakes.
The government will also accelerate plans to demutualise the Indonesia Stock Exchange. Demutualisation separates ownership of the exchange from its management, a structure that is widely seen as improving governance, accountability and operational transparency.
Airlangga said communication with MSCI has been positive so far. Authorities are now awaiting the index provider’s response to the proposed reforms.
Danantara Indonesia chief Rosan Roeslani said any investment by the sovereign wealth fund in the stock market would follow the new governance framework linked to demutualisation.
This is meant to reassure investors that state participation will follow clear rules.
Currency under pressure
The market stress has also weighed on the rupiah. The currency was trading at 16,790 per dollar on Friday, close to last week’s record low of 16,985.
Investors are also watching broader policy signals, including fiscal expansion and the government’s role in financial markets.
For Indonesia, this is more than a short-term market correction. It is a test of trust.
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