Assessing Indonesia’s Capital Market Reform Plan

Indonesia’s capital market reform plan aims to address structural weaknesses exposed after MSCI froze Indonesia’s index weighting, triggering market volatility. Despite rapid growth in market capitalization, the market remains shallow, concentrated, and constrained by low liquidity and limited investor participation. Key reforms include raising free float requirements, demutualizing the Indonesia Stock Exchange, strengthening ownership disclosure, and improving surveillance systems. However, risks include institutional capacity gaps and governance conflicts. Sustainable reform requires stronger coordination, firm legal enforcement, improved investor confidence, and broader economic transformation.

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