GIC Temasek reject claims of pushing MSCI to downgrade Indonesia

Singapore's sovereign wealth funds GIC and Temasek have pushed back against allegations that they or their personnel leaned on index provider MSCI to consider reclassifying Indonesia's stock market. The rejections came after former Indonesian trade minister Muhammad Lutfi accused the two investors on Oct 20 of coercing MSCI into weighing a downgrade. According to the former minister, such a move could spark market panic and open the door to snapping up Indonesian equities at bargain prices.

GIC: Decisions rest on fundamentals

A GIC spokesperson told The Straits Times: “Our investment decisions are not driven by index classifications or top-down views of a market and instead by company- and asset-level fundamentals. “We have been invested in Indonesia for over 30 years across asset classes and will continue to invest where we find good, bottom-up, risk-adjusted opportunities.” Fock Wai Hoong, head of Asia Pacific excluding China and India at Temasek Global Investments, described the allegations as having “no basis and are patently untrue”. He said: “No one from Temasek – neither the institution nor the individuals working for the institution – has ever reached out to MSCI in order to influence any decisions they have ever made around any exchange across the region. Maybe I’ll leave it at that.” Fock made the remarks to reporters on Oct 21 at the launch of the e-Conomy SEA 2026 report, held at Google's office in Mapletree Business City.

Exchange chief defends index provider's independence

Indonesia Stock Exchange (IDX) president director Jeffrey Hendrik on Oct 20 affirmed MSCI's independence in the wake of the accusations. “We have always believed, and continue to believe, that global index providers are independent,” Jeffrey told reporters at the IDX building in Jakarta. The dispute erupted after a record two-day market rout triggered by MSCI's Oct 15 warning that Indonesia could be dropped from its global indexes. The provider cited shareholding opacity, insider trading and regulatory enforcement among its concerns. MSCI assesses all global markets annually, sorting them into developed, emerging, frontier or standalone categories based on economic development, market size, liquidity and accessibility. It has opened a consultation on whether to move Indonesia from emerging market to standalone status — a step that could deal a heavy blow, as its stocks would be shut out of indices investors use.

Market fallout and reform efforts

Any reclassification could carry major consequences for Indonesian equities, including investment flows from funds that track MSCI indices, which serve widely as benchmarks for global markets. Eastspring Investments, the asset management arm of Prudential, said the index provider's move suggests the concerns go beyond market size or liquidity and touch more fundamental questions about the integrity and credibility of trading mechanisms. Other standalone markets include Argentina, Lebanon and Zimbabwe. The Jakarta Composite Index dropped more than 14% from Oct 16 to Oct 19 following MSCI's warning. It then rebounded 5% on Oct 20, after IDX said the previous evening that it would remove companies with highly concentrated share ownership from its flagship index — its latest bid to avoid ejection from MSCI's global emerging markets benchmark. The announcement came after a virtual meeting between the exchange and MSCI officials. Such companies account for almost a fifth of the index's combined market value and include Dian Swastatika Sentosa and Barito Renewables Energy — two of the index's largest companies by market value. The exchange did not specify when the expulsions would take effect. This was not the first time MSCI has warned that it would downgrade Indonesia. It previously warned in January that it could downgrade the country from emerging to frontier market. The Jakarta exchange has since introduced reforms, including cutting the minimum price at which a stock can trade from 50 rupiah to 1 rupiah in an attempt to promote liquidity and doubling the minimum free float – the portion of stocks available for trading – to 15% of a company’s shares. MSCI is accepting market feedback until April 30, 2027, and will announce its decision by June 30, 2027.