SINGAPORE, Jan 30 (Reuters) - Indonesia stocks are poised for a nervous start on Friday, after authorities announced a slate of measures to address a warning from MSCI that triggered a more than $80 billion
market rout, shaking an already fragile investor confidence.
The benchmark Jakarta Composite Index dropped more than 8% on Wednesday and Thursday, its steepest two-day decline since April. The rupiah fell to a record low of 16,985 last week and was hovering not far from those levels.
The stock market selloff came after MSCI on Wednesday raised concerns about ownership and trading transparency in Indonesian stocks and warned the market risked a downgrade to frontier status if it failed to resolve the issues.
Foreign capital has flowed out of Indonesia because of concerns about how President Prabowo Subianto is widening the fiscal deficit and ramping up the state's involvement in financial markets.
The appointment of his nephew, Thomas Djiwandono, to the central bank this month, after last year's abrupt firing of respected Finance Minister Sri Mulyani Indrawati, has shaken confidence in Prabowo's fiscal stewardship.
Some of the measures announced by Indonesian authorities on Thursday included doubling the free float requirement on listed companies to 15% and checking the affiliations of shareholders with less than 5% ownership.
The regulators said the communication with MSCI had thus far been positive and it was awaiting a response to its proposed measures, which the regulators hoped could be implemented soon and the issues resolved by March.
The response appears to have allayed some investor concerns but sentiment remains fragile.
"Policymakers want to fix this," said Paul Dmitriev, senior analyst & co-portfolio manager at Global X ETFs. "The government has every incentive to fix these issues as systemic outflows would be substantial and could materially impact the market."
Foreign investors net sold around $645 million worth of Indonesia stocks in the two-day selloff, exchange data showed. They had sold $1 billion worth of Indonesia shares in 2025.
(Reporting by Ankur Banerjee and Gregor Stuart Hunter in Singapore; Editing by Jacqueline Wong)
