Top Indonesian financial regulators quit after US$80 billion market meltdown

JAKARTA/SINGAPORE - The heads of Indonesia’s financial regulator and stock exchange resigned suddenly on Jan 30 in a shake-up that followed

this week’s US$80 billion (S$101.5 billion) stock market rout

and mounting concerns over transparency and governance.

The departures followed a warning from MSCI that it may downgrade Indonesian equities to “frontier” status, a move that helped trigger the steepest two-day fall in Jakarta stocks since April and intensified pressure on authorities to restore investor confidence.

The Financial Services Regulator, known as OJK, said its chief, Mahendra Siregar, had quit along with three senior officials - including his deputy and the head of capital markets.

The officials had told reporters just hours earlier that they would lead an effort to address MSCI’s concerns and urged investors to remain calm. Indonesia Stock Exchange chief Iman Rachman also resigned on Jan 30.

OJK said the exits would not affect the regulator’s operations.

Government promises major market reforms

Indonesia’s chief economic minister Airlangga Hartarto said authorities were

committed to stock market reforms

and stressed that the country’s economic fundamentals remained sound.

Proposed measures include doubling the free float requirement of shares to 15 per cent, allowing pension and insurance funds to increase capital market investment to 20 per cent of their portfolio from 8 per cent, and checking the affiliation of shareholders with ownership of less than 5 per cent.

“The government guarantees protection for all investors by maintaining good governance and transparency,” Mr Airlangga said.

The resignations from OJK alongside Mr Siregar included the deputy chief Mirza Adityaswara, Mr Inarno Djajadi, chief executive for capital markets, financial derivatives and carbon-exchange supervision, and Deputy Commissioner I.B. Aditya Jayaantara, responsible for issuer oversight, transaction supervision and special investigations.

Mr Inarno had previously told reporters that Mr Rachman’s resignation would not disrupt IDX operations and that OJK aimed to resolve MSCI’s concerns by May.

“We remind all investors to remain calm and rational when making investment decisions,” said Mr Inarno.

Hours later, after markets closed on Jan 30, he resigned along with the OJK chief.

The benchmark Jakarta Composite Index dropped more than 8 per cent on Jan 28 and Jan 29 but closed 1.18 per cent up on Jan 30, after authorities announced the proposed measures to address MSCI’s concerns and ease investor worry.

The rupiah was last at 16,790 to the US dollar, near its weakest-ever rate of 16,985 set last week.

“Someone had to take responsibility for the loss of confidence,” said Mr Mohit Mirpuri, portfolio manager at SGMC Capital in Singapore, referring to Mr Iman.

“The bigger picture is a reset and an opportunity for the exchange to emerge stronger with clearer standards and governance,” Mr Mirpuri said.

Fiscal deficit concerns drive foreign outflows

Foreign capital outflows have increased due to concern about Indonesian President Prabowo Subianto’s widening the fiscal deficit and expanding state involvement in financial markets.

Confidence has also been shaken by this month’s appointment of his nephew Thomas Djiwandono to the central bank and last year’s dismissal of respected finance minister Sri Mulyani Indrawati.

Regulators said communication with MSCI had been positive and that they were awaiting a response to their proposed measures which they hoped to implement soon.

MSCI, a global provider of financial market and other indexes, has given Indonesia until May to show signs of progress, at which point it will reassess its status.

That could result in a lower weighting for Indonesia in its emerging market benchmark, or even a downgrade to frontier market status.

“Policymakers want to fix this,” said Mr Paul Dmitriev, senior analyst and co-portfolio manager at Global X ETFs. “The government has every incentive to fix these issues as systemic outflows would be substantial and could materially impact the market.”

Foreign investors sold net of around US$645 million worth of shares in the two-day selloff, exchange data showed. They sold US$1 billion worth of shares in 2025. REUTERS