S&P Dow Jones Indices has placed Indonesia on a watchlist for potential market reclassification and indicated it may consider special treatment for Indonesian securities if related issues worsen.
The index provider stated that it will continue to monitor developments concerning the transparency of stock ownership in Indonesia, as well as the guidance issued by the Indonesia Stock Exchange to address information disclosure problems and their potential impact on liquidity.
S&P Dow Jones Indices noted that if the underlying issues are not resolved within one year of implementing any special measures, Indonesia could be reclassified from an emerging market to a frontier market.
This warning follows closely on the heels of MSCI's similar concerns raised months ago regarding the investability of Indonesian stocks and its warning of a potential downgrade to frontier market status. In recent years, worries about free-float shares have become a significant point of contention in the Indonesian market. Investors have complained that some of the country's largest listed companies have limited actually tradable shares, with control concentrated in the hands of a few wealthy individuals.
The Jakarta Composite Index has fallen 31% year-to-date, making it one of the worst-performing major global equity benchmarks.
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