Before making a decision on the emerging market, MSCI raised new concerns about transparency issues in Indonesia.

Index provider MSCI expressed further concerns about the investment attractiveness of Indonesia on Thursday, pointing out limited transparency in its equity structure and the presence of collusive trading, which is yet another blow to the worst-performing major stock market globally. This warning comes as MSCI is set to decide next week whether to reclassify Indonesia's market from "emerging market" to "frontier market," a move that could trigger outflows of up to $13 billion. Since MSCI highlighted transparency issues in January and warned of a potential downgrade to frontier market status, the Indonesian capital markets have been on a downward spiral. In a market accessibility assessment report released on Thursday, MSCI downgraded Indonesia's information flow standards to "negative," reflecting the opacity of equity data and market activities, which not only hinders fair price formation but also limits global investors' ability to assess companies' true public float. The warning in January prompted authorities to introduce a series of reform measures, including doubling the minimum public float requirement for listed companies to 15%, and senior management at the stock exchange and regulatory agencies collectively resigned one afternoon in January. In April, MSCI extended its review of the Indonesian market and removed six companies from its index in May, most of which were linked to tycoons, leading to another steep plunge in stock prices. As one of the largest global market index providers, MSCI's downgrade decision will force passive investment funds to sell stocks and create pressure for active fund managers benchmarked against MSCI indices to reduce their holdings.