Flooring Guide by Cinvex – JAKARTA – Indonesia’s capital market authorities have launched four key reform initiatives, prominently featuring the disclosure of High Shareholder Concentration (HSC) data. This move is a crucial step towards fostering a more transparent and credible domestic capital market, aiming to enhance investor confidence and market integrity.
The Indonesia Stock Exchange (IDX) acknowledges that this transitional phase carries short-term repercussions, particularly the risk of selling pressure from foreign funds. This is largely due to the potential reduction of Indonesia’s stock weight in influential global indices like the MSCI. Consequently, on Monday, April 6, 2026, the Jakarta Composite Index (IHSG) closed down 0.53% at 6,989. This figure reflects a year-to-date (YtD) correction of 19.17%, extending the composite index’s weakening trend over the past week, from March 30 to April 2, 2026, which saw a 0.99% decline.
Despite these immediate challenges, Jeffrey Hendrik, acting President Director of the IDX, expressed strong conviction in the long-term benefits of these reforms. He asserted that the current actions by the IDX and the Financial Services Authority (OJK) are strategically aimed at improving the country’s capital market for sustained future growth. “We believe that in the long run, Indonesia’s weighting in global index providers will increase. This will be driven by enhanced transparency, a deeper market, and significantly improved governance,” Jeffrey stated during an interview at the IDX Building in Jakarta.
Jeffrey further highlighted that the IDX views the current short-term corrections as valuable opportunities for local investors. He emphasized the inherent long-term nature of capital market investments, drawing parallels to historical economic crises, such as the COVID-19 pandemic, which saw the IHSG eventually recover and even hit new all-time highs (ATH) in 2025. While acknowledging these opportunities, he cautioned investors to remain rational, prioritizing fundamental analysis of issuers and adopting strategies aligned with their individual risk profiles.
Addressing concerns about the potential reduction of Indonesia’s stock index weight in MSCI due to HSC implementation, Jeffrey cited Hong Kong’s experience where similar rules led to a 12-month risk of constituent removal for issuers with over 50% concentrated share ownership. He clarified that in Indonesia, the decision regarding index adjustments rests solely with MSCI. The IDX’s role, he explained, is to provide a framework for issuers on the HSC list to improve their share distribution and exit the list. “The question of concentrated shares influencing MSCI’s decision to remove constituents must be directed to the global index provider. Our function as a regulator is to disclose this information to the public, fostering greater transparency,” he added.
The IDX is optimistic that these transparency efforts will significantly bolster the Indonesian capital market’s global standing in the long term, attracting global investors back to the country post-transition. As of April 2, 2026, foreign investors have recorded a net sell of Rp 33.83 trillion YtD in the Indonesian stock market. Jeffrey concluded, “For the long term, we are highly confident that our market fundamentals will be much stronger with a more transparent and deeper market, leading to increased participation from global investors, domestic institutional investors, and retail investors.”
IDX COMPOSITE INDEX – TradingView
The Pivotal Role of Domestic Investors
Concurring with the IDX’s perspective, Hasan Fawzi, Chief Executive of Capital Market, Derivative Finance, and Carbon Exchange Supervision at the OJK, observed that despite foreign outflows, domestic investor capacity remains robust. In March 2026, the number of capital market investors in Indonesia expanded by 1.78 million, bringing the total to 24.74 million, marking a 21.51% YtD growth. Fawzi underscored the capital market’s vital role in providing long-term financing for businesses, noting that corporate fundraising had reached Rp 51.96 trillion YtD by the end of March 2026.
An analysis of the Indonesian stock market’s composition as of April 2, 2026, shows that domestic investors accounted for 66% of the total YtD, with foreign investors making up the remaining 34%. Both the IDX and OJK view the current short-term market corrections as a natural and unavoidable part of the adjustment process during this transitional phase. Fawzi emphasized, “It is reasonable in the context of moving towards a higher quality market in the medium and long term. Our policy’s main focus is to continue building and strengthening the foundations of market integrity, ensuring our market remains transparent, credible, and consistently capable of sustainable growth.”
Meanwhile, Sukarno Alatas, Senior Analyst at Kiwoom Sekuritas Indonesia, pointed out that the short-term pressure from foreign fund outflows would primarily impact stocks with relatively small public ownership. He suggested that regulators should implement the HSC rules gradually, encourage companies to increase their public float, and maintain active trading. Effective communication with entities like MSCI is also crucial to prevent abrupt changes in global indices. Alatas warned that if a stock is delisted from the MSCI Emerging Markets Index, foreign funds tracking that index would automatically sell their holdings, potentially leading to price drops, reduced trading activity, and wider bid-ask spreads. However, he noted that such situations could recover if the stock’s structure is improved. “In the short term, the market might face pressure. But in the long run, this transparency will make the market healthier and more trustworthy for large investors. While domestic investors can help cushion the decline, they are not yet strong enough to quickly replace all foreign funds,” Sukarno elaborated.
Echoing these sentiments, Muhammad Wafi, Head of Research at KISI Sekuritas, assessed that the capacity of domestic investors is relatively limited. He believes that local liquidity cannot absorb massive selling pressure instantly, especially as the majority of domestic investors are likely to adopt a “wait and see” approach regarding foreign fund movements. Wafi outlined a negative scenario where Indonesian stocks could be removed from the MSCI index due to concentration issues, triggering automatic sell-offs by global passive funds, leading to sharp valuation pressure and an aggregate reduction in the IHSG’s weighting.
Wafi identified sectors most vulnerable to increased foreign outflows as infrastructure, energy, and big-cap stocks with a “pseudo free float” status. To balance the selling pressure during this transitional period while maintaining global appeal for the Indonesian market, he stressed the importance of issuers strengthening their Good Corporate Governance (GCG) to rebuild long-term investor trust. “For regulators, this necessitates a gradual implementation [of HSC], extended adjustment deadlines, and corporate incentives such as rights issues or private placements,” Wafi concluded.