JAKARTA - Global index provider MSCI is removing six companies from its Indonesia index at the end of May, citing ongoing transparency concerns. The move sent shares tumbling Wednesday and pushed the Jakarta Composite Index down nearly 2% to a one-year low.
Two of the removed firms had been flagged by Indonesian authorities for highly concentrated ownership - a key issue in MSCI's broader review of the market, which is set to conclude in June. That review had already sparked fears of a potential downgrade to "frontier" status earlier this year.
The affected companies are:
- Amman Mineral International
- Chandra Asri Pacific
- Dian Swastatika Sentosa
- Barito Renewables Energy
- Petrindo Jaya Kreasi
- Sumber Alfaria Trijaya
Most saw their shares plunge around 10%. Sumber Alfaria was an exception, down just 1.8%, after being moved to the small-cap index.
Many of the removed names are tied to Indonesian tycoons. Business magnate Prajogo Pangestu holds controlling stakes in Chandra Asri, Barito Renewables, and Petrindo. Dian Swastatika is part of the Sinar Mas Group, owned by the billionaire Widjaja family.
Analysts say the culling is a constructive step. Macquarie Capital sees a high probability Indonesia avoids a full downgrade. Foreign investors have sold about $2.2 billion in Indonesian stocks this year, with Goldman Sachs estimating $1.6 billion in outflows tied to the rebalancing.
Indonesia's Financial Services Authority (OJK) called the market reaction within normal range and said bolder reforms on market integrity will continue.
The index changes will take effect May 29.