Indonesia stock exchange CEO resigns after $80 billion market rout

• Foreign investors sold $645 million in Indonesian stocks during the two-day selloff, adding to $1 billion in prior outflows amid concerns over President Prabowo's widening fiscal deficit and increased state market involvement
• The crisis deepened investor worries following controversial appointments including the president's nephew to the central bank and the firing of respected Finance Minister Sri Mulyani Indrawati
• Regulators are in communication with MSCI about proposed measures and hope to resolve the transparency issues by March to avoid a downgrade that could trigger substantial systemic outflows

Indonesia Stock Exchange CEO Resigns After $80 Billion Market Rout

Key Developments:

Indonesia's stock exchange CEO resigned following an unprecedented market selloff triggered by MSCI's warning of a potential downgrade to frontier market status. The benchmark Jakarta Composite Index plummeted more than 8% over Wednesday and Thursday—the steepest two-day decline since April—wiping out over $80 billion in market value.

Market Impact:

Foreign investors dumped approximately $645 million in Indonesian stocks during the two-day rout, adding to $1 billion in prior outflows. The rupiah hit a record low of 16,985 last week and remains near those distressed levels. MSCI raised concerns about ownership and trading transparency in Indonesian equities, threatening the market's emerging status.

Regulatory Response:

Indonesian authorities announced emergency measures Thursday, including doubling the free float requirement for listed companies to 15% and reviewing corporate affiliations. Regulators reported positive communication with MSCI and aim to resolve issues by March. The response has partially calmed investor concerns, though sentiment remains fragile.

Political Context:

Investor confidence has been severely shaken by President Prabowo Subianto's policies, including widening fiscal deficits and increased state intervention in financial markets. The January appointment of his nephew, Thomas Djiwandono, to the central bank, combined with last year's abrupt dismissal of respected Finance Minister Sri Mulyani Indrawati, has raised serious concerns about fiscal governance.

Outlook:

Analysts note that policymakers have strong incentives to address these issues quickly, as continued systemic outflows could materially damage the market. Indonesia stocks face a nervous trading session ahead as markets digest these developments.