JAKARTA — Iman Rachman, chief executive officer of the Indonesia Stock Exchange (IDX), resigned Friday following a two-day market collapse that erased $84 billion in value, according to statements made during a press briefing. The resignation came after MSCI Inc. warned it may downgrade Indonesia from emerging to frontier market status due to concerns over shareholding transparency and trading practices.
“As a form of accountability for the events of the past two days, I hereby declare my resignation,” Rachman told reporters at the IDX media room in Jakarta. “I hope this is for the best for the capital market, and that my resignation will improve our capital market.”
The Jakarta Composite Index plunged more than 8% on Wednesday and Thursday, marking its steepest two-day decline since the 1998 Asian Financial Crisis. Trading was halted twice as circuit breakers were triggered when the benchmark fell as much as 16.7% before recovering some losses. Foreign investors sold approximately $645 million worth of Indonesian stocks during the selloff, exchange data shows.
MSCI Warning Sparks Capital Flight
The market rout began Tuesday after MSCI announced it would temporarily freeze all index additions and updates to Indonesian securities. The index provider cited “fundamental investability issues” due to “opacity in shareholding structures and concerns about possible coordinated trading behavior that undermines proper price formation.”
MSCI warned it would reassess Indonesia’s market accessibility status by May 2026. Failure to show sufficient progress could trigger a downgrade to frontier market status, placing Indonesia alongside Bangladesh, Pakistan, Sri Lanka, and Vietnam. Such a move would force passive investment funds tracking MSCI’s emerging markets benchmark to sell their holdings.
Goldman Sachs downgraded Indonesian equities to “underweight” Wednesday, warning outflows could reach $13 billion if the market is downgraded. UBS cut local shares to neutral. “The reforms outlined are directionally positive, but execution and the appointment of a credible successor will be key to determining whether these concerns fully dissipate,” said Gary Tan, portfolio manager at Allspring Global Investments.
Regulators Double Free Float Requirement
Indonesia’s Financial Services Authority (OJK) moved swiftly to contain the damage. Chairman Mahendra Siregar announced Thursday the regulator would double the minimum free float requirement for listed companies to 15%, up from the current 7.5%, starting February 2026.
“Self-regulatory organizations will issue regulations setting a minimum free float of 15%, which will be implemented in the near future with full transparency,” Mahendra said at a press conference at the IDX building in Jakarta. The requirement will apply to both existing listed companies and new issuers conducting initial public offerings.
Companies failing to meet the requirement within a specified period may face an exit policy under regulatory supervision. The exchange also indicated it would scrutinize the affiliations of shareholders holding less than 5% ownership.
At the heart of investor concerns is the low free float of Indonesian equities. The country’s biggest companies are thinly traded and controlled by a handful of wealthy individuals, a structure investors argue distorts the index and risks manipulation. MSCI currently requires a free float of 15% over a period of time for a security to be included in its investable emerging-market universe.
“The government has every incentive to fix these issues as systemic outflows would be substantial and could materially impact the market,” said Paul Dmitriev, senior analyst at Global X ETFs.
Broader Confidence Crisis Under Prabowo
The market turmoil compounds existing investor concerns about President Prabowo Subianto’s economic stewardship. Parliament appointed his nephew, Thomas Djiwandono, as Bank Indonesia deputy governor on January 27, raising alarms about the central bank’s independence.
Djiwandono, who previously served as deputy finance minister, replaces Juda Agung in a post he will hold until 2031. His appointment beat two seasoned central bank officials, prompting concerns the move made it appear “as if power at Bank Indonesia is inherited,” according to analysts.
The rupiah fell to a record low of 16,985 per dollar on January 20, surpassing a previous record set in April 2025. The currency dropped nearly 2% in January after falling 3.5% in 2025. Analysts at Barclays expect the rupiah to trade as low as 17,300 this year amid persisting fiscal concerns.
Investor confidence was already shaken by the abrupt dismissal of respected Finance Minister Sri Mulyani Indrawati in September 2025. Sri Mulyani, who served as finance chief under three presidents over 14 years, was replaced by economist Purbaya Yudhi Sadewa following violent protests and the looting of her residence.
Markets reacted negatively to her departure, viewing it as the biggest blow to the administration’s economic credibility. Her global reputation and sound fiscal management had eased the transition from the previous government.
Market Shows Signs of Stabilization
Sentiment began recovering after regulators outlined reform measures Thursday. Officials said they were preparing additional steps to support the market, including changes to the exchange’s shareholding structure and higher caps on insurers’ capital-market allocations.
Regulators indicated communications with MSCI have been “positive” and expressed hope issues could be resolved by March. “We see that the institution still wants to include shares of Indonesian issuers in its global index, which shows that Indonesia’s capital market remains highly potential and investable for international investors,” Mahendra said.
Rachman, who was appointed CEO less than four years ago, had pushed for extended trading hours and introduced short selling to boost liquidity, though success was limited. Within hours of his resignation Friday, officials said the sovereign wealth fund Danantara may become involved in market support efforts.
The Jakarta Composite Index remains under pressure as investors await concrete implementation of promised reforms and the appointment of a credible successor to lead the exchange through the crisis.
