MSCI’s Classification Review: Potential Frontier‑Market Status for Indonesia

TEMPO.CO, Jakarta — Morgan Stanley Capital International (MSCI) is set to release the results of its annual market classification review next week, determining whether Indonesia will remain in the emerging‑market category or be moved to frontier‑market status.

As a preliminary reference, MSCI published its Global Market Accessibility Review 2026 on Friday, June 19, 2026. The report indicates that MSCI has downgraded Indonesia’s information‑flow outlook to negative and maintained a negative outlook on the liberalization of the country’s foreign‑exchange market.

An economist from Paramadina University, Wijayanto Samirin, says the chance of Indonesia being demoted to a frontier market is relatively low, given the market’s size and regional significance. “However, even MSCI’s notes could trigger a significant outflow of foreign capital,” he told Tempo on Thursday, June 19, 2026.

According to Wijayanto, the negative rating for information flow reflects lingering concerns about transparency in the Indonesian capital market. In other words, MSCI believes the domestic capital‑market authority has yet to implement substantive institutional reforms.

Regarding the foreign‑exchange market, Wijayanto argues that the concern stems from Bank Indonesia’s policy direction, which is increasingly restricting foreign‑exchange transactions.

Most recently, Bank Indonesia announced a cap on non‑underlying foreign‑exchange purchases at US$10,000 per person per month, aimed at supporting the rupiah exchange rate. The economist also noted that policies governing export‑earnings foreign exchange have further amplified MSCI’s concerns.

Wijayanto observes that a market’s investment appeal diminishes when it becomes disconnected from global financial ecosystems. “Capital‑control measures are characteristic of frontier markets, and such traits are becoming more evident in our capital market,” he warned.

Nevertheless, Wijayanto predicts that Indonesia will likely retain its emerging‑market status. However, he cautions that if the current trend of anti‑market policies persists in the coming years, Indonesia could eventually be re‑classified as a frontier market.

In response to MSCI’s assessment, Hasan Fawzi, Executive Head of the Capital Market, Financial Derivatives, and Carbon Exchange Supervision at the Financial Services Authority (OJK), described the feedback as part of a constructive improvement process. “Regarding information flow, we view this input as part of a constructive evaluation that aligns with the capital‑market reform agenda being pursued jointly by the OJK, the Indonesia Stock Exchange, the Indonesia Central Securities Depository, the Indonesia Clearing Guarantee Corporation, and all industry stakeholders,” he said in an official statement on Friday, June 19, 2026.

The OJK also pointed out that MSCI acknowledged several regulatory improvements enacted by Indonesia. While the final assessment score remained negative — mirroring last year’s result — the number of negative notes on foreign‑exchange liberalization has decreased. To address MSCI’s concerns, the OJK will continue to coordinate closely with relevant authorities, including Bank Indonesia.

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