S&P DJI Puts Indonesia on Watchlist 2027, IHSG Plunges 1.3%

JAKARTA — Indonesia's capital market took a heavy blow on Wednesday, July 8, 2026, after global index provider S&P Dow Jones Indices (S&P DJI) announced that Indonesia has been placed on its 2027 Watchlist with a potential downgrade scenario from Emerging Market (EM) to Frontier Market (FM) status.

The Jakarta Composite Index (IHSG) reacted negatively, plunging 1.32% or 79 points to 5,907.70 in early trading, halting the recovery momentum that had built up in early July 2026. Trading volume reached Rp2.59 trillion with 6.02 billion shares traded across 568 thousand transactions. A total of 479 stocks closed in the red, while only 134 managed to stay in positive territory.

All stock sectors recorded losses, with the deepest corrections in basic materials, property, and consumer sectors. Large-cap stocks such as BBRI, AMMN, SMRI, BBCA, and MORA were the main drags on IHSG's performance today.

WHAT IS THE S&P DJI WATCHLIST AND WHY DOES IT MATTER?

S&P DJI is one of the world's most influential index providers, alongside MSCI and FTSE Russell. In its Country Classification - 2026/2027 Watchlist announcement released Tuesday, July 7, 2026, Indonesia was placed on the watchlist for a possible classification change during the 2027 annual review.

Indonesia currently retains its Emerging Market status. However, S&P DJI has opened the possibility of reclassification to Special Measures or Frontier Market if structural issues in Indonesia's capital market remain unresolved.

Besides Indonesia, S&P DJI also placed Turkey on the 2027 Watchlist with a similar scenario, and Nigeria was flagged for a potential upgrade from Standalone Market to Frontier Market.

ROOT CAUSE: MARKET TRANSPARENCY ISSUES

The core issue driving S&P DJI's decision is share ownership transparency and its impact on liquidity and price formation reliability in the market.

Global institutional investors have long raised concerns about the lack of transparency in share ownership structures on the Indonesian exchange. There are also concerns about suspected coordinated trading patterns that make it difficult for foreign investors to assess true free float levels. This has led to doubts about whether market prices genuinely reflect fair market mechanisms.

S&P DJI acknowledged that Indonesian authorities — from OJK to IDX — have taken several regulatory steps to address these issues. However, S&P issued a stern warning: if the problems remain unresolved, Indonesia could face Special Measures or even reclassification to Frontier Market during the 2027 review.

DOUBLE PRESSURE: MSCI TOO WATCHES INDONESIA

This S&P DJI warning comes amid similar pressure from another global index provider, MSCI, which had earlier flagged concerns about Indonesia's market.

In the MSCI 2026 Market Classification Review released in late June 2026, MSCI maintained Indonesia's Emerging Market status. However, it downgraded Indonesia's Information Flow criteria rating — from a no-issues category to one requiring improvement.

MSCI highlighted three structural issues nearly identical to S&P's concerns:

• Opacity or lack of clarity in share ownership structures
• Indications of coordinated trading patterns disrupting price formation
• Limited availability of English-language information for foreign investors

MSCI warned that if adequate progress is not seen by the November 2026 Index Review, further action will be considered — including the possibility of reclassifying Indonesia from Emerging Market to Frontier Market.

IDX RESPONSE: COMMUNICATION AND REFORMS

Facing this pressure, the Indonesia Stock Exchange (IDX) moved quickly. IDX President Director Jeffrey Hendrik stated that the exchange would establish constructive communication and discussions with S&P DJI to understand the concerns raised.

"IDX will establish constructive communication and discussions with S&P Dow Jones Indices to understand the concerns raised and the various aspects being evaluated," Jeffrey said in an official statement on Wednesday (July 8, 2026).

Together with OJK and all stakeholders, IDX is committed to continuing efforts to improve transparency in Indonesia's capital market to ensure a fair, orderly, and efficient market.

IMPACT: FOREIGN FUND FLOWS AT RISK

The consequences of a downgrade are severe. Already-strained foreign fund flows could worsen significantly. Data shows that net foreign sell on the Indonesia Stock Exchange has reached approximately US$3.6 billion year-to-date in 2026.

A downgrade — by either MSCI or S&P — risks triggering even larger capital outflows. This is because many global passive funds (ETFs and index funds) automatically track indices tied to specific market classifications. If a country is downgraded from Emerging Market to Frontier Market, funds that are mandated to invest only in Emerging Markets would be forced to sell their holdings.

Year-to-date, Indonesia's stock index has fallen more than 30%, or approximately 35% when measured in US dollar terms. This makes Indonesia one of the worst-performing markets in Asia during 2026.

OUTLOOK

Despite the very real pressure on Indonesia's capital market, there is still room for optimism. Out of 18 accessibility criteria assessed by MSCI, 10 criteria still received the highest rating, indicating that the Indonesian exchange is actually aligned with global best practices in many aspects.

OJK, together with IDX and KSEI, has rolled out a series of reforms to address global investors' concerns. Transparency has become the top priority in Indonesia's capital market reform agenda. OJK has also requested that IDX hold regular technical meetings with MSCI to resolve remaining issues, particularly regarding the timely availability of English-language information for foreign investors.

If improvements in market transparency and liquidity are successfully implemented in the near term, positive sentiment could return and Indonesia's Emerging Market status could be maintained in the 2027 review. Retail investors are advised to monitor regulatory policy developments closely and avoid making decisions based solely on short-term market sentiment.