Indonesian Stock Exchange CEO Resigns After $80 Billion Market Rout— What's Going On?

The CEO of the Indonesia Stock Exchange (IDX), Iman Rachman, resigned on Friday, underscoring deepening investor anxiety after a sudden market plunge wiped out about $80 billion in equity value this week. Rachman’s exit is framed as a personal act of accountability for the “recent market condition.” At a press conference, the executive said he hoped his decision would lead to improvements in the capital market. What Triggered The Sell-Off? Rachman’s resignation came in the wake of a sharp sell-off on the Jakarta Composite Index (JCI) that saw the benchmark index fall more than 8% over two sessions — its biggest multi-day drop in months — and triggered automatic trading halts on Wednesday and Thursday. That rout was sparked by a surprise warning from MSCI Inc., the influential global index compiler, which flagged “investability” and transparency concerns in Indonesian equities. “Investors highlighted that fundamental investability issues persist due to ongoing opacity in shareholding structures and concerns about possible coordinated trading behaviour that undermines proper price formation,” MSCI said late Tuesday. MSCI suggested Indonesia risks being downgraded from "emerging market" to "frontier market" status unless structural issues are addressed. MSCI's benchmarks are widely used by global funds as a barometer for where to allocate capital. A downgrade or reduction in Indonesia’s index weighting could force systematic selling by funds that track MSCI indices, amplifying market stress. Regulators Reassure Investors In response to the sell-off and MSCI's criticisms, Indonesian regulators have moved to reassure investors. The IDX had said on Wednesday that it recognised MSCI’s feedback and reaffirmed its commitment to increase the weighting of Indonesian equities in the MSCI indexes. The Financial Services Authority (OJK) said it would raise the minimum free-float requirement for listed companies to 15% to improve liquidity and transparency. The Indonesian government also said it would increase the limit for pension funds and insurers to invest in the stock market from 8% to 20% of their assets. These measures helped calm markets slightly on Friday, with the JCI trading 1.18% higher in the session. Still, overall confidence remains fragile, with the turmoil in Indonesian equities unfolding against broader uncertainty over the country's economic and fiscal direction under President Prabowo Subianto. Investor unease, reflected by the uptick in foreign capital outflows, has been fueled by plans to expand social spending even as government revenues weaken, pressure on the rupiah, which has been trading near record lows, and renewed questions about central bank independence after Prabowo's nephew was confirmed as deputy governor this week. Image via Shutterstock