MSCI Announced Plans For Stricter Rules, JCI Slides
JCI fell sharply on Monday. What happened?
Key Takeaways:
JCI dropped -2% on Monday after MSCI announced plans for stricter rules around “free float” calculations.
Conglomerate stocks saw heavy pressure as domestic investors sold.
New Rules From MSCI Sparked Panic Selling
The Jakarta Composite Index (JCI) dropped sharply on Monday (-1.87%) as investors reacted to news about possible changes to the MSCI Index rules. The proposed rule would apply only to Indonesian stocks, not other markets. At one point in the morning, the market was down nearly 3% but rebounded slightly in the afternoon.The sell-off was led by large-cap conglomerate stocks such as BREN, BRPT, and CDIA.
The panic started after MSCI — a global index provider followed by many foreign investors — announced it’s considering a change to how it measures “free float”, the portion of a company’s shares that can be freely traded by the public.
Currently, MSCI uses its own estimates, but it now plans to use monthly data from KSEI (the Indonesia Central Securities Depository) as a reference to calculate free float. It would take the lower figure between the current method (based on company filings) and KSEI’s estimated free float. In addition, certain KSEI categories — such as Corporates, Others, and Scrip shares — may be classified as non-free float, which could reduce the number of shares considered “investable.”
If implemented, this new approach would provide a clearer picture of actual share ownership in each company, making it more accurate and transparent. MSCI will gather market feedback until December 2025, with a final decision expected in January 2026.
Why This Matters
Being included in an MSCI Index is a big deal for companies; it’s like earning a global stamp of approval. Only companies that meet certain standards, such as having a high enough free float, can be part of the index. Companies that are included in the index are more appealing to global investors as it signals quality and investability.
If the new rule makes the requirements stricter, some companies might no longer qualify for the index, or new ones might find it harder to be added. This raised fears that foreign investors would pull out from affected stocks, sparking a wave of panic selling in the market. Interestingly, much of the sell-off yesterday was driven by domestic investors, while foreign investors remained net buyers.
What Simpan’s Investment Team Did
Given the sharp market swings, Simpan’s Investment Team continued to take a cautious approach:
In the past few weeks, we had trimmed our positions in some conglomerate stocks.
We reallocated the proceeds into blue-chip names: companies with stronger fundamentals, cheaper valuation, and higher earnings yield, offering more stability and upside when markets turn volatile.