lobal index provider MSCI has downgraded Indonesia’s information flow criterion to negative in its latest review, raising concerns over the “investability” of the country’s stock market.
In its Global Market Accessibility Review published on Thursday afternoon, MSCI said the ongoing opacity in shareholding structures and indications of coordinated trading undermined proper price formation.
“These issues materially limit international institutional investors’ ability to assess true free float and to rely on observed market prices for portfolio construction and index replication,” reads the review.
MSCI also highlighted concerns over equal access to information for foreign investors, noting that company information was not always readily available in English.
Indonesia also has “no efficient offshore currency market” and there are constraints on the onshore market.
These concerns come ahead of an announcement on June 23, when MSCI is set to wrap up its assessment and determine whether it will continue to categorize Indonesia as an emerging market.
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A downgrade in the country’s status by the index compiler could potentially cost Indonesia as much as US$13 billion in capital outflows, investment bank Goldman Sachs has estimated.
