(Bloomberg) — Indonesia will remove stocks with concentrated ownership from its benchmark equities index, the latest effort to avert a possible downgrade of its market status by MSCI Inc.
Jeffrey Hendrik, chief executive of the Indonesia Stock Exchange, said after a meeting with MSCI representatives Monday that the move was aimed at creating a “more credible and integrity-driven price index.”
Stocks with high shareholder concentration currently account for about 18% of the Jakarta Composite Index’s total weighting, he said, adding that Hong Kong’s benchmark Hang Seng Index also excludes such stocks.
“So this is best practice,” he told reporters in Jakarta. “We hope it will be effective.”
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He also announced that alongside the bourse’s move earlier this year to publish the names of investors owning at least 1% of a company’s shares, the exchange will indicate whether each holder is affiliated with the company.
The moves are a part of regulatory efforts aimed at preventing a double downgrade by MSCI to standalone-market status from emerging-market status after the global index provider last week highlighted concerns about persistent coordinated trading practices and opaque ownership in Indonesia’s equities market.
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Stocks with high shareholder concentration will remain tradable, but their price movements will no longer affect the Jakarta Composite Index, Hendrik said. He added that the bourse would announce implementation timelines for both initiatives soon.
–With assistance from Norman Harsono and Grace Sihombing.
(Corrects fifth paragraph to reflect that publication has already taken place, rather than being planned.)
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