JAKARTA – Several investment managers (IMs) anticipate short-term selling pressure following the recent MSCI announcement, particularly concerning the deletion of highly concentrated stocks from its indices.
Reza Fahmi Riawan, Senior Vice President, Head of Retail, Product Research & Distribution at Henan Putihrai Asset Management (HPMA), explained that today’s MSCI announcement primarily acts as a technical catalyst for constituent stocks. This impact largely stems from global passive investors rebalancing their portfolios in response to index adjustments.
Reza elaborated that stocks earmarked for potential exclusion typically face immediate short-term selling pressure. Conversely, those receiving increased weighting or new index inclusions are likely to experience temporary inflows from passive funds, driving their demand in the market.
He noted that stocks most vulnerable to evaluation for potential changes generally belong to issuers with limited free float, declining liquidity, or a market capitalization approaching MSCI’s minimum methodology threshold. These factors make them less appealing for broad institutional investment.
Conversely, strong candidates for index inclusion usually originate from large-cap issuers boasting sufficient free float and consistent liquidity. These attributes are crucial prerequisites for accessibility by global institutional investors, ensuring the stocks can be traded efficiently in significant volumes.
“From a fund flow perspective, constituent changes can trigger significant short-term movements in passive funds, as benchmark fund managers automatically adjust their positions,” Reza stated on Tuesday (April 21, 2026). He cautioned, however, that “the impact tends to be a one-off event and does not necessarily alter the fundamental outlook for the Indonesian market.”
For astute investors, Reza suggested this period presents an opportunity to implement selective rotation strategies, focusing on fundamentally sound stocks poised for potential index inclusion. This approach prioritizes long-term value over transient market shifts.
“From Henan Asset’s perspective, we believe MSCI changes should not only be viewed as short-term trading opportunities but also as key indicators of which stocks are becoming increasingly relevant on the global investor radar,” Reza added, emphasizing a broader strategic viewpoint.
The latest MSCI announcement coincided with the Indonesia Stock Exchange (IDX) experiencing a downturn. The Jakarta Composite Index (IHSG) closed down 0.46%, or 34.73 points, at 7,559.38 on Tuesday (April 21, 2026). The composite index had opened at 7,560.28, briefly touching its highest point at 7,568.98 before retreating.
As MSCI pushes for capital market reforms in Indonesia, the resilience of the IHSG is being tested. Guntur Putra, President & CEO of Pinnacle Investment, remarked that the overall short-term impact of this MSCI announcement appears limited. This is largely because MSCI continues to apply interim policies, including a freeze on increasing Foreign Inclusion Factor (FIF) and no new stock additions to the index.
However, Guntur highlighted that the primary risk lies in potential stock deletions, particularly for those categorized under High Shareholding Concentration (HSC). He suggested that stocks with high ownership concentration are susceptible to reduced weighting or even complete exclusion from the index, posing a significant risk for their investors.
(A list of the Top 10 MSCI Indonesia Stocks was also referenced.)
Guntur further elaborated that his firm has observed stocks with low free float and concentrated ownership structures as prime candidates for negative evaluation. This concentrated ownership can limit market accessibility and liquidity, making them less attractive for index providers.
Moreover, Guntur noted that MSCI’s utilization of shareholder data exceeding 1% could lead to adjustments in free float calculations. Such adjustments might consequently impact the relative valuations of specific stocks within the index, creating shifts in investor perception.
“BREN and DSSA are at the top of the list as prime candidates for potential index deletion, as these stocks have a high probability of being removed from the MSCI index,” Guntur disclosed, pointing to specific examples of high-risk stocks.
He also commented that the impact of constituent changes on passive fund flows into the Indonesian market tends to be minimal. In the current scenario, with no new stock additions and a focus on potential reductions (deletions), Guntur stated that the dominant risk is an outflow from stocks potentially affected by deletion or a reduction in weighting.
“Overall, however, the impact tends to be a net outflow, though its nature is more concentrated on specific stocks rather than the entire market,” he concluded, underscoring the targeted nature of the fund movements.
Guntur advised investors to leverage this momentum by reducing exposure to stocks with low free float and high HSC risk. Instead, he recommended shifting towards stocks with robust liquidity and large free float, which could emerge as future beneficiaries. Additionally, he suggested exploiting potential short-term price dislocations resulting from passive fund rebalancing activities.
Meanwhile, Rudiyanto, Director of Panin Asset Management, advised investors to focus on stock fundamentals and prospects in light of the MSCI announcement. He emphasized the importance of underlying company strength over fleeting index adjustments.
“Index rebalancing only has an effect for a few days leading up to the actual implementation date,” he stated, reiterating the short-lived nature of such technical shifts.
MSCI’s Stance
Global index provider MSCI Inc. has opted to maintain a freeze on its Indonesian stock index, signaling a cautious approach. MSCI is actively reviewing the impact of Indonesia’s capital market transparency reforms on both free float determination and overall investment accessibility within the market.
MSCI has highlighted several key reform measures. These include enhanced transparency for shareholdings exceeding 1%, a more detailed classification of investors, the implementation of a High Shareholding Concentration (HSC) framework, and a roadmap to increase the minimum free float threshold to 15%. These reforms aim to improve market integrity and liquidity.
This comprehensive evaluation follows a series of new policies announced by the Financial Services Authority (OJK), the Indonesia Stock Exchange (IDX), and the Indonesia Central Securities Depository (KSEI), all designed to bolster the market’s regulatory framework.
“As part of this evaluation process, MSCI confirms it will maintain interim treatment for Indonesian stocks during the May 2026 index review,” MSCI stated in its announcement on Tuesday (April 21, 2026). This interim measure reflects a period of careful assessment.
The policy entails freezing increases in both Foreign Inclusion Factors (FIF) and Number of Shares (NOS). Crucially, it also prevents the addition of any new Indonesian stocks to the MSCI Investable Market Indexes (IMI), limiting immediate expansion.
Furthermore, MSCI will not implement any capitalization class upgrades, including transitions from Small Cap to Standard Index. On the other hand, stocks identified as having high ownership concentration under the HSC framework will be removed from the index, underscoring a commitment to market efficiency.
MSCI indicated its potential use of shareholder disclosure data for holdings above 1% to adjust free float estimates if deemed necessary. However, the institution clarified that it would not fully integrate this new data into its assessment methodology until the review process is complete and comprehensive feedback from market participants has been collected.
“This approach aims to limit index turnover and investability risk, while simultaneously providing time to evaluate the effectiveness of the newly announced reforms,” MSCI wrote, outlining the strategic intent behind its measured actions.
Moving forward, MSCI commits to continuous dialogue with domestic regulators and market participants. This engagement is crucial for assessing the consistency and effectiveness of these new data sources. The findings of this ongoing evaluation are slated for release during the Market Accessibility Review in June 2026.
This development has drawn considerable attention from market participants, given MSCI’s decisions have the potential to significantly influence foreign fund flows and global investor perceptions of the Indonesian stock market.
The following are the main points of MSCI Inc.’s decision regarding Indonesian stocks:
Interim Policy (May 2026 Review):
- Restricting increases in Foreign Inclusion Factors (FIF) and Number of Shares (NOS).
- No new Indonesian stocks will be added to the MSCI Investable Market Indexes (IMI).
- No capitalization class upgrades (e.g., from Small Cap to Standard).
Treatment of Stocks:
- Deletion of stocks identified by Indonesian authorities as falling under the High Shareholding Concentration (HSC) category.
- Potential selective use of shareholder disclosure data for holdings ≥1% for free float adjustments.
Stance on Indonesian Capital Market Reforms:
- Still assessing the effectiveness of new policies from the Financial Services Authority (OJK), Indonesia Stock Exchange (IDX), and Indonesia Central Securities Depository (KSEI).
- New data will not be fully incorporated into the index methodology until the evaluation is complete.
Policy Objectives:
- To mitigate potential index turnover.
- To reduce risks to the investability of the Indonesian market during this transitional period.
Next Steps:
- Gathering feedback from market participants.
- Review findings will be presented at the Market Accessibility Review in June 2026.