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View all search resultsMarkets don’t lie
While such a neo-statist development approach is within the global zeitgeist, there seems to be doubt about it working in this country.
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An electronic display board inside the main hall of the Indonesia Stock Exchange (IDX) in South Jakarta shows an overall downward movement across most stocks during the lunch break on Jan. 29, when the IDX Composite index fell 6.3 percent after global ratings provider MSCI raised concerns about free float and trading transparency. (TJP/Deni Ghifari)
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s if MSCI’s recent rebuke over a lack of transparency in Indonesian stocks was not bad enough, credit rating agency Moody’s last week lowered its outlook on Indonesia’s sovereign rating from stable to negative.
If that is not a red flag, then nothing is.
While the rating itself has not changed for now, the decline in the outlook means a future assessment of Indonesia’s creditworthiness is more likely to result in a downgrade than an upgrade.
It is a warning of sorts, just like MSCI’s recommendation to increase the clarity of shareholder information.
Both still give local authorities some time to make the necessary changes, but it is crucial that our government gets the message from MSCI and Moody’s, loud and clear.
Words will not do here, action is needed, because investors are not fooled.
Responding to MSCI’s concerns is the easier part, as the corrections required are more technical than political, such as publishing more granular data about shareholdings, whereas a proper response to Moody’s gripes may require the government to rethink some of its economic policy positions.
