Singapore’s sovereign investors GIC and Temasek have denied accusations that they pressured MSCI to consider downgrading Indonesia’s stock market classification. The denials followed a claim by former Trade Minister Muhammad Lutfi on Tuesday (20/10). Lutfi alleged the two funds forced MSCI to weigh the move. He said it could trigger panic in the stock market and let investors buy Indonesian shares more cheaply.
MSCI issued its warning on Friday, 16 October, about a possible reclassification of Indonesia in its global index. Indonesian stocks sold off heavily for two days after that warning. The index provider cited unclear share ownership, suspected insider trading and enforcement of market rules as concerns. It has opened a consultation on moving Indonesia from emerging market to standalone market status.
Denials from the two investors
A GIC spokesperson said the fund’s investment decisions are not based on index classification or on a view of a market as a whole. GIC looks at each company’s fundamentals and target assets, the spokesperson said, according to The Business Times. The fund has invested in Indonesia for more than 30 years across asset classes and will keep investing when it finds good opportunities.
Fock Wai Hoong, Temasek’s Global Chief Investment Officer for Asia Pacific excluding China and India, rejected the claim directly. No one at Temasek, institution or individual, has ever contacted MSCI to influence any decision it makes on any exchange in the region, he said. He added: “Perhaps that is enough.”
What a reclassification would mean
A move to standalone status could remove Indonesian shares from MSCI indices used as global investment benchmarks. Standalone markets currently include Argentina, Lebanon and Zimbabwe. Jeffrey Hendrik, President Director of the Indonesia Stock Exchange (BEI), said the exchange still believes global index providers are independent.
Related: Jakarta stocks slump 3.64% as MSCI weighs Indonesia downgrade · IHSG plunges 11.34% as MSCI weighs Indonesia downgrade
Source: MSCI
