The head of the Indonesia Stock Exchange resigned on Friday following a warning from the index provider MSCI about a potential downgrade to “frontier” market status, which led to a market rout exceeding $80 billion.
The benchmark Jakarta Composite Index was trading flat a day after authorities introduced measures to address MSCI’s concerns and alleviate investor apprehensions. Over the past Wednesday and Thursday, the index plummeted more than 8%, marking its steepest two-day decline since April.
The Indonesian rupiah was last recorded at 16,800 against the U.S. dollar, after reaching a record low of 16,985 the previous week.
Iman Rachman announced his resignation as CEO in a televised statement, citing his responsibility for the current situation. “I hope this is the best decision for the capital market. May my resignation lead to improvements in our capital market,” he remarked. “Hopefully, the index, which opened positively this morning, will continue to improve in the coming days.”
Mohit Mirpuri, a portfolio manager at SGMC Capital in Singapore, commented, “Someone had to take responsibility. The bigger picture is a reset and an opportunity for the exchange to emerge stronger with clearer standards and governance.”
The market selloff was triggered after MSCI expressed concerns on Wednesday regarding share ownership and trading transparency, indicating that the market risked a downgrade to frontier status if improvements were not made.
Foreign capital outflows have been increasing due to worries about President Prabowo Subianto’s approach to widening the fiscal deficit and expanding state involvement in financial markets. Confidence has also been shaken by the appointment of his nephew, Thomas Djiwandono, to the central bank this month and the dismissal of the respected finance minister, Sri Mulyani Indrawati, last year.
Among the improvement measures proposed on Thursday were plans to double the free float requirement to 15% and scrutinize the affiliation of shareholders with less than 5% ownership.
Regulators have reported positive communication with MSCI and are awaiting a response to the proposed measures, which they hope to implement soon. Although the response seems to have calmed investor concerns, sentiment remains fragile.
Paul Dmitriev, senior analyst and co-portfolio manager at Global X ETFs, stated, “Policymakers want to fix this. The government has every incentive to fix these issues as systemic outflows would be substantial and could materially impact the market.”
Foreign investors sold approximately a net $645 million worth of shares during the two-day selloff, according to exchange data, with $1 billion worth of shares sold in 2025.
