MSCI Inc. (NYSE: MSCI) has launched a consultation on a proposal to reclassify the MSCI Indonesia Indexes from Emerging Market to Standalone Market status, citing persistent concerns about the investability of the Indonesian equity market.

According to a statement from MSCI, market participants have flagged ongoing issues including opacity in shareholding structures and suspected coordinated trading behavior. Indonesian authorities had previously announced reforms, such as enhanced shareholder disclosure requirements, High Shareholding Concentration reporting, and a roadmap toward a minimum free float requirement of 15%. However, institutional investors told MSCI that consistent implementation and evidence of sustained impact have not materialized.

MSCI said it had indicated in June 2026 that a consultation on reclassification would be considered if sufficient progress was not evident by the November 2026 Index Review. The company said market participants confirmed that progress has not been observed consistently across the Indonesian equity market, with concerns remaining around continued suspected coordinated trading and a lack of meaningful enforcement.

MSCI noted that feedback from market participants suggested a reclassification to Frontier Market status would not adequately reflect the depth of the market problems, leading to the Standalone Market proposal instead.

The existing freeze on certain index-related changes for Indonesian securities will remain in place until further notice. Under this treatment, MSCI will not implement increases to Foreign Inclusion Factors or Number of Shares, additions to the MSCI Indonesia Investable Market Index, or upward migrations across size-segment indexes.

MSCI will continue to delete securities identified under the High Shareholding Concentration framework and to use the 1% shareholder disclosure data to adjust free float estimates.

The consultation period runs until April 30, 2027, and MSCI expects to announce its final decision on or before June 30, 2027. MSCI said it expects to proceed with the reclassification unless the consultation identifies clear evidence of material improvements in market governance and functioning.