Singapore state investor Temasek has denied allegations by former Indonesian trade minister Muhammad Lutfi that it pressured MSCI to propose downgrading Indonesia’s stock market, calling the claims “patently untrue”.
“Those allegations have no basis and are patently untrue,” said Fock Wai Hoong, head of Asia Pacific, excluding China and India, at Temasek Global Investments, during a media briefing on the e-Conomy SEA report on Wednesday (Oct 21).
Fock said neither Temasek as an institution nor anyone working for it had ever approached MSCI to influence its decisions regarding any stock exchange.
His comments followed a social media video in which Lutfi, who also previously headed Indonesia’s Investment Coordinating Board, or BKPM, accused Temasek and fellow Singapore state investor GIC of pressing MSCI to threaten Indonesia with standalone classification.
Lutfi alleged that the objective was to trigger panic selling, enabling foreign institutions to buy Indonesian assets at lower prices.
“They pressure MSCI to threaten to downgrade Indonesia to a standalone market, creating mass panic so that our stock index collapses,” Lutfi said in Indonesian. “Then they buy back Indonesia’s best assets at discounted prices.”
Lutfi did not provide evidence in his remarks to substantiate the alleged scheme.
“The allegations about GIC and our staff are untrue. Our investment decisions are not driven by index classifications or top-down views of a market and instead by company- and asset-level fundamentals. We have been invested in Indonesia for over 30 years across asset classes and will continue to invest where we find good, bottom-up, risk-adjusted opportunities,” said a GIC spokesperson responding to queries from DealStreetAsia.
MSCI announced on October 15 that it was consulting on a proposal to reclassify Indonesia from an emerging market to a standalone market. The move came as a surprise, arriving a month before the November review MSCI had previously set to assess Indonesia’s reform progress and consider a possible downgrade to frontier status. The proposed downgrade has not been finalised.
The announcement triggered a sharp sell-off, with the Jakarta Composite Index falling 11.57% on October 16.
Standalone country indexes are excluded from both the MSCI Emerging Markets Index and the MSCI Frontier Markets Index, putting Indonesia at risk of losing investment from funds tracking those benchmarks.
MSCI cited persistent concerns about opaque shareholding structures, suspected coordinated trading and insufficient evidence of meaningful enforcement. It acknowledged reforms announced by Indonesian authorities, including expanded shareholder disclosures and a roadmap towards a 15% minimum free float, but said investors wanted consistent implementation and sustained improvements.
The index provider said feedback from market participants suggested a downgrade to frontier status would not adequately reflect the depth of Indonesia’s market problems. Its announcement did not identify the institutions providing that feedback.
MSCI is accepting responses to the consultation until April 30, 2027, and plans to announce a final decision by June 30, 2027.
