JAKARTA/SINGAPORE, Jan 30 (Reuters) - Indonesia's chief economic minister promised increased financial market transparency and improved corporate governance on Friday, after the stock exchange chief
Indonesian Financial Regulators Resign Amidst $80 Billion Market Crisis
Regulatory Shake-Up and Market Response
By Fransiska Nangoy, Ananda Teresia and Bernadette Christina
Government Commitment to Market Reforms
JAKARTA/SINGAPORE, Jan 30 (Reuters) - The heads of Indonesia's financial regulator and the stock exchange resigned suddenly on Friday in a dramatic shake‑up that followed this week's $80 billion market rout and mounting concerns over transparency and governance.
Impact on Investors and Market Sentiment
The departures came after MSCI warned it may downgrade Indonesian equities to "frontier" status, a move that helped spark the steepest two‑day fall in Jakarta stocks since April and intensified pressure on authorities to restore investor confidence.
Foreign Capital Outflows and Economic Concerns
A statement from the Financial Services Regulator, known as OJK, said its chief, Mahendra Siregar, had quit along with two senior officials - including the head of capital markets - as a "moral responsibility" to support recovery efforts.
The announcement came just hours after the officials had told reporters they would lead work to address MSCI’s concerns and urged investors to remain calm, following the morning resignation of Indonesia Stock Exchange (IDX) chief Iman Rachman.
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%, allowing pension and insurance funds to increase capital market investment to 20% of their portfolio from 8%, and checking the affiliation of shareholders with ownership of less than 5%.
"The government guarantees protection for all investors by maintaining good governance and transparency," Airlangga said.
Those resigning from OJK alongside Siregar included 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.
Just hours earlier, Inarno had assured reporters that 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 Inarno.
Hours later, after markets closed on Friday, he resigned along with the OJK chief.
The benchmark Jakarta Composite Index dropped more than 8% on Wednesday and Thursday but closed 1.18% up on Friday, after authorities announced the proposed measures to address MSCI's concerns and ease investor worry.
The rupiah was last at 16,790 to the U.S. dollar, near its weakest-ever rate of 16,985 set last week.
"Someone had to take responsibility for the loss of confidence," said Mohit Mirpuri, portfolio manager at SGMC Capital in Singapore, referring to Iman.
"The bigger picture is a reset and an opportunity for the exchange to emerge stronger with clearer standards and governance," Mirpuri said.
FISCAL DEFICIT CONCERNS DRIVE FOREIGN OUTFLOWS
Foreign capital outflows have increased due to concern about 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 has been positive and that they were awaiting a response to their proposed measures which they hoped to implement soon.
Their swift action appears to have allayed investor concern but sentiment remains fragile.
"Policymakers want to fix this," said 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 $645 million worth of shares in the two-day selloff, exchange data showed. They sold $1 billion worth of shares in 2025. ($1 = 16,780 rupiah)
(Reporting by Ananda Teresia, Fransiska Nangoy, Gibran Peshimam and Bernadette Christina in Jakarta, Ankur Banerjee and Gregor Stuart Hunter in Singapore; Writing by Raju Gopalakrishnan; Editing by Christopher Cushing, Tomasz Janowski and Louise Heavens)
