Jakarta stocks bounce back as Indonesia tackles MSCI concerns

Indonesia's benchmark stock index rebounded Tuesday following a steep correction that had wiped out significant gains. The Jakarta Composite Index fell sharply over two consecutive trading sessions, marking its steepest decline since 1989, before mounting a recovery as government and market regulators unveiled steps to address investor concerns.

The volatility was sparked by potential changes to MSCI index inclusion criteria, which could affect the classification and weighting of Indonesian equities in global investment portfolios. Market analysts attributed the rapid sell-off to jitters surrounding ownership structure requirements and the possible removal of companies with concentrated shareholding from key indices.

Authorities moved quickly to stabilize sentiment, with policymakers signalling plans to streamline regulations around corporate ownership concentration. The measures aim to improve corporate governance standards and attract foreign investment by addressing MSCI's structural requirements.

The recovery in the index reflected investor relief at the decisive government response, though analysts cautioned that sentiment remained fragile pending further details on implementation. Indonesian market watchers noted that clarity on ownership rules and timeline could prove crucial to maintaining the rebound and preventing future volatility tied to index-related concerns.