Indonesia Stock Market "Bloody Week": Multiple Crashes, Trading Halts, Exchange CEO "Resigns to Apologize"

Iman Rachman, President of the Indonesia Stock Exchange, announced his resignation on Friday, taking responsibility for this week's market crash. The turmoil, triggered by an MSCI downgrade warning, led the Jakarta Composite Index to plunge 16% over two days, wiping out over $80 billion in market value and triggering trading halts.

At Friday's media briefing, Rachman stated, "As accountability for the recent conditions in Indonesia's capital markets, I hereby announce my resignation." He hopes his departure can help the stock market "improve." The exchange will appoint an acting head, but the successor has not been named.

Following the news of Rachman's resignation, Indonesia's stock market rose 1.7% on Friday, narrowing the two-day cumulative loss to 6.5%. Investors remain cautious about whether regulators can meet MSCI’s requirements.

According to Wallstreetcn’s previous report, the index plunged 16% over two days, erasing over $80 billion in market value. The turmoil began last Wednesday after MSCI released a report, citing “fundamental investability problems” in company data transmission at the Indonesian exchange and warning that unless resolved by May, Indonesia could be downgraded from emerging to frontier market status. Afterwards, global investment banks like Goldman Sachs downgraded Indonesian equities, triggering massive capital outflows.

MSCI warning triggers consecutive plunges and trading halts

MSCI’s report on Wednesday sparked the market rout. The major global index compiler said there were “fundamental investability problems” regarding the transparency of shareholding structures at IDX, expressing concerns about "opaque ownership and potential concerted trading.” MSCI requires more granular and reliable information, including stricter surveillance, to better assess free-float and investability of securities.

The core issue is the excessively low free-float ratio of Indonesian stocks. The country’s largest companies see thin trading, controlled by a handful of wealthy individuals—investors say this structure distorts the index and creates manipulation risks. The issue has been a point of contention for years, with participants believing that low liquidity in some stocks makes most of the market uninvestable and hard to track.

Wednesday's plunge exceeded 7% and triggered a 30-minute trading pause. On Thursday, Goldman Sachs further downgraded Indonesia, warning that loss of emerging-market status "could trigger widespread sell-off.” The bank cautioned that, in an extreme scenario, over $13 billion in outflows might occur. The index tumbled another 10% that day.

By week's end, the Jakarta Composite had fallen 6.5% since Monday—the worst two-day drop since the 1998 Asian Financial Crisis.

Regulators introduce emergency reforms

To counter the market collapse, Indonesia’s Financial Services Authority chief announced Thursday that the free-float requirement for listed companies would rise to 15%—double the current level, with the new rule effective next month. Regulators will also review the relationships of shareholders holding less than 5%.

Indonesia’s Coordinating Economic Minister Airlangga Hartarto said Friday at a press conference that the government is expediting the demutualization reform of the stock exchange this year, aiming to improve governance, boost liquidity, expand capital access, and attract new investors. This reform will align IDX with global peers that have adopted shareholder-owned structures.

The government is also preparing measures to boost investor confidence, including increasing insurance companies' allocation limits to capital markets and possible intervention by sovereign wealth fund Danantara. Regulators noted ongoing positive communication with MSCI and are awaiting its response to these steps, hoping for swift implementation.

Currently, MSCI has no minimum free float percentage for country classification, which depends on factors like accessibility and economic development. But for inclusion in its investable emerging-market index, securities typically need to maintain 15% free float for a period, though exceptions exist.

Structural issues drive long-term investor concerns

“As accountability for recent events, I hereby announce my resignation,” Rachman said at Friday's press conference:

"I hope this benefits the capital market, and my resignation improves our capital market."

Rachman served as CEO under four years, having pushed for extended trading hours and short selling to improve liquidity, though with limited results. Earlier, exchange officials tried to incentivize market participation, but fundamental structural issues in Indonesia’s stock market remain unsolved.

This crisis has reignited doubts about Indonesia’s financial markets. The market, long seen as a beneficiary of the country’s rapid economic growth, now faces investor concerns over rising public debt, the sudden resignation of the finance minister, and ballooning fiscal deficits, prompting many to pull out. From September to November 2025, global funds dumped Indonesian bonds, only returning in December.

President Prabowo’s economic policies have added to uncertainty. In January, he appointed nephew Thomas Djiwandono to the central bank and last year dismissed the respected finance minister Sri Mulyani Indrawati—moves that shook investor confidence in his leadership. Foreign capital has flowed out, worried that Prabowo will widen fiscal deficits and increase government intervention in financial markets.

Data shows foreign investors were net sellers of $1 billion in Indonesian stocks over 2025. The rupiah hit an all-time low of 16,985 per US dollar last week, rebounding to about 16,800 this week.

Investor confidence dented, outlook uncertain

Mohit Mirpuri, Senior Partner at SGMC Capital, commented:

"This should be seen as a reset, not blame. Stressful times often accelerate change, opening doors for new leadership with a clear mandate to raise standards, improve market structure, and restore investor confidence."

He believes responsibility must be taken, but the bigger picture is a chance for the exchange to reset and strengthen governance with clearer standards.

Gary Tan, Portfolio Manager at Allspring Global Investments, said:

"The outlined reform path is positive, but execution and appointing a credible successor will be key to truly resolving these concerns."

Paul Dmitriev, Senior Analyst and Co-Portfolio Manager at Global X ETFs, stated:

"Policymakers are determined to fix this. The government is strongly motivated, as systemic outflows could be huge and have real market impact."

On Friday, HSBC became the latest bank to downgrade Indonesian equities over growth concerns, joining Goldman Sachs and UBS. Many investors are still watching to see if regulators can do enough to satisfy index compilers.

Despite the stock market’s battering, officials insist the country's fundamentals remain sound, citing robust domestic demand and ongoing structural reforms as buffers against external shocks. President Prabowo is closely monitoring developments, highlighting their importance to his economic agenda.

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