Indonesia stock exchange chief defends MSCI after ex-minister alleges Singapore interference

JAKARTA – Indonesia’s stock exchange chief has defended the independence of global index provider MSCI, after a former trade minister accused Singapore of plotting to drive down Indonesian share prices.Indonesia Stock Exchange (IDX) president director Jeffrey Hendrik said on Oct 20 that global index providers operated independently, responding to allegations by former trade minister Muhammad Lutfi that Singapore’s investment company Temasek and its sovereign wealth fund GIC were pressuring MSCI to downgrade Indonesia’s stock market to “standalone” status.“We have always believed, and continue to believe, that global index providers are independent,” Jeffrey told reporters at the IDX building in Jakarta.Lutfi has escalated his criticism of neighboring countries, accusing Singapore of pointing to Indonesia’s recent stock market downturn and transboundary haze issues as a means to undermine Jakarta’s economic interests. The former minister also took aim at Malaysian politicians over calls to restrict financing for Indonesian plantation companies.Jeffrey said IDX would focus on improving Indonesia’s stock market, which has been rattled by MSCI’s warning that the country could lose its status as an emerging market.Former trade minister Muhammad Lutfi, who served under presidents Susilo Bambang Yudhoyono and Joko Widodo, had on Oct 20 accused Singapore’s investment entities of trying to trigger a sharp fall in Indonesian share prices so that foreign investors could buy Indonesian assets cheaply.In Instagram posts uploaded in both English and Bahasa Indonesia, Lutfi had claimed among other things that foreign investors had already pulled large amounts of money out of Indonesia but had failed to push share prices down sufficiently.“When previous foreign capital outflows failed to give them sufficient room to buy back at low prices, behind-the-scenes pressure emerged through GIC and Temasek for MSCI to threaten to downgrade Indonesia to Standalone Market,” he said.“The goal was one: create market panic so that prices correct sharply, then scoop up our strategic assets at discounted prices.”Lutfi, who has also headed indonesia’s investment promotion agency and was a former ambassador to Japan and the US, has not provided evidence to substantiate his allegations.The former minister had in his posts on Oct 20 also suggested that the stock market turmoil and the ongoing dispute over transboundary haze were connected.“From the haze issue to the fall in the stock index, this is not merely about compliance or the environment, but about who controls the nation’s assets,” he said .Forest fires across the country, particularly on the islands of Sumatra and Kalimantan – made worse by a strong El Nino weather phenomenon – have sent haze across the region.MSCI, whose stock market indexes are widely followed by international investors, announced on Oct 15 that it was considering downgrading Indonesia from an “emerging market” to a “standalone market” in 2027.Such a move would make Indonesian stocks less attractive to major international investment funds, potentially prompting them to withdraw billions of dollars from the country.MSCI cited concerns about a lack of transparency in share ownership, suspicious trading activity and weaknesses in market oversight.The warning sparked the deepest two-day sell-off ever recorded for Indonesian stocks, with the market losing about US$82 billion (S$105 billion) in value, before recovering some ground on Oct 20. MSCI is expected to make a final decision by the end of June 2027.Hariz Baharudin is Indonesia correspondent at The Straits Times. He has an interest in Indonesia and the wider currents shaping South-east Asia.