The Chief Executive Officer of the Indonesian Stock Exchange (IDX), Iman Rachman, resigned on Friday following a sharp market sell-off that erased approximately $84 billion in value over two days amid concerns of a potential downgrade by global index provider MSCI.
In a statement, the IDX confirmed that Rachman stepped down after taking responsibility for what it described as “recent market conditions,” without providing further details.
Addressing a press conference, Rachman expressed hope that his resignation would contribute positively to the capital market. He said he believed the decision was in the best interest of the market and could help restore confidence, noting early signs of recovery after the benchmark index opened higher on Friday, according to Reuters.
Market volatility intensified earlier in the week after MSCI warned that Indonesia could be downgraded from emerging market status to frontier market status. The index provider cited concerns over trading transparency, including opaque shareholding structures and indications of coordinated trading activity that could distort price discovery.
Despite recent losses, the Jakarta Composite Index rose 1.18% on Friday, following declines of 7.35% on Wednesday and 1.06% on Thursday.
A day before his resignation, Rachman told CNBC that Indonesian regulators had engaged in discussions with MSCI aimed at addressing transparency concerns, particularly around free float levels and ownership disclosures.
On Thursday, Indonesia’s financial regulator announced plans to double the minimum free float requirement for listed companies to 15%, a move aimed at improving market transparency in response to MSCI’s concerns, according to Reuters.
The IDX also acknowledged MSCI’s feedback in a statement released on Wednesday, describing it as a valuable contribution to ongoing efforts to strengthen the credibility of Indonesia’s capital markets. The exchange reiterated its commitment to increasing the weighting of Indonesian equities within MSCI indices.
Commenting on the market turmoil, Pandu Sjahrir, Chief Investment Officer of Indonesia’s sovereign wealth fund Danatara, described the sell-off as a temporary shock. Speaking to CNBC, he said the market reaction resembled a “cold plunge” that could ultimately lead to renewed strength if reforms are properly implemented.
Pandu noted that Indonesia’s equity market currently sees daily liquidity of about $1 billion, well below the estimated $8 billion to $10 billion needed for a more robust market. He emphasized that improving transparency and responding constructively to investor concerns would be critical to achieving long-term market stability.