Circuit breaker! The Indonesian stock market crashes again amid fears of a continued downturn, causing widespread concern among investors and triggering automatic trading halts to prevent further losses.

February 2nd, the Indonesian stock market opened sharply lower again on Monday.

As of press time, the Indonesia Composite Index fell 5%, triggering a circuit breaker. Despite announcing a series of reform measures and personnel changes, investor confidence in the Indonesian market has not yet recovered.

Last week, influenced by MSCI warnings, the Jakarta Composite Index plummeted 7.35% on January 25th (Wednesday), and continued to decline 1.06% on January 26th (Thursday), with a total drop of over 8% within two trading days, and a market cap shrinkage of $84 billion. Until January 27th (Friday), market sentiment slightly eased, and the index rebounded modestly by 1.18%.

Subsequently, the Indonesia Stock Exchange (IDX) announced that CEO Iman Rachman had officially resigned, aiming to take responsibility for the recent market volatility. In the two trading days prior, the market value evaporated by $84 billion, triggered by a potential downgrade warning issued by global index provider MSCI, which caused panic to spread.

MSCI downgrade warning acts as a “trigger,” pointing directly to transparency issues

The direct cause of this market turbulence was a statement released by MSCI on January 24th (Tuesday). The organization explicitly stated that, due to “fundamental investability issues” in the Indonesian stock market, it is considering downgrading Indonesia from the “Emerging Markets” category to the “Frontier Markets” category. MSCI noted in the statement that investors are generally concerned about the lack of transparency in the shareholding structure of listed companies and the presence of potential collusive trading behaviors that could affect normal price formation. These issues continue to undermine the market’s investability.

As a widely referenced index provider for global funds, MSCI’s rating adjustments have a significant impact on international capital flows. If Indonesia is ultimately downgraded, funds tracking MSCI indices may be forced to systematically sell Indonesian stocks, further intensifying market pressure.

CEO resigns “to take responsibility,” hoping to restore market confidence

At a press conference on January 30th, Iman Rachman stated that his resignation was to “take responsibility for the recent market conditions.” In his statement, he mentioned, “I hope this is the most beneficial decision for Indonesia’s capital market, and I hope my resignation can help improve the market situation.” He also noted that he saw the index opening higher on the morning of Friday (January 30th) and expects the market to continue to improve.

The day before his resignation, Rachman had said that Indonesian regulators had begun communication with MSCI, focusing on improving data transparency, especially regarding the free float ratio of listed companies and disclosure of shareholding structures, in response to MSCI’s concerns.

Regulators take urgent action, raising free float requirement to 15%

To ease market panic and address MSCI’s concerns, Indonesia’s financial regulators announced key reform measures on January 29th (Thursday): doubling the minimum free float requirement for listed companies to 15%. In a statement on January 25th (Wednesday), the Indonesia Stock Exchange also emphasized that MSCI’s feedback is regarded as “an important reference for enhancing the credibility of Indonesia’s capital market,” and committed to actively promoting an increase in the weight of Indonesian stocks in MSCI indices.

Industry: Market needs a “transparency revolution,” liquidity gap to be filled

Regarding this market volatility, Pandu Sjahrir, Chief Investment Officer of Indonesia’s sovereign wealth fund Danatara, said that the recent sharp decline was like “a beneficial cold shower,” and that “after brief panic, the market needs reform to self-repair and regain vitality.” He also pointed out that Indonesia’s stock market currently has an average daily liquidity of about $1 billion, but to meet international investors’ needs, this scale needs to be increased by 8 to 10 times.

“The only way out is to improve transparency,” Pandu emphasized. “Regulators must listen to market voices rather than adopt a defensive stance. Only by solving structural issues can investor confidence be truly stabilized.”