Indonesia Drafts New Rules After $80B Market Rout

Indonesia Responds to Market Selloff with New Regulations

The Indonesia Stock Exchange will release a draft of new market regulations this Wednesday, following an $80 billion market selloff. The move, announced by the financial regulator OJK, directly addresses concerns from index provider MSCI that threaten the country's emerging market status.

Overview of the Situation

The regulatory action comes after MSCI warned of a potential downgrade of Indonesia to a frontier market due to issues with ownership and trading transparency. This warning triggered significant capital flight, causing the Jakarta Composite Index to plunge by as much as 16.7% in just two days.

Impact on the Market

The proposed reforms aim to restore investor confidence and stabilize the market. Key changes in the draft include an amendment to increase the minimum requirement for free float shares. The financial regulator has committed to moving quickly to review and implement the new rules, with a target publication date of March 2026.

Summary

The draft regulations will be open for public and industry feedback for 10 days upon release. This period will be crucial for shaping the final rules intended to strengthen Indonesia's capital market governance and prevent further instability.

FAQ

Q: Why is Indonesia introducing new market rules?
A: To address concerns from MSCI about market transparency that led to an $80 billion selloff and a potential downgrade from emerging market status.

Q: What was the immediate impact on the stock market?
A: The Jakarta Composite Index fell by 16.7% in two days following the MSCI warning.

Source: Investing.com