Indonesian capital market stands on the brink of a new era. Early this year, the Indonesia Composite Index (IHSG) climbed to a record high amidst a weakening Rupiah, defying deteriorating macroeconomic fundamentals. This anomaly prompted Morgan Stanley Capital International (MSCI), who already sent warning letters to Indonesian capital market authorities last year, to froze Indonesia’s weighting in its index. It immediately led to a sharp fall in IHSG. The recent event revealed more than a typical shift in investors’ sentiment, as it exposed deeper structural vulnerabilities within Indonesia’s capital market.

The warning letter from MSCI served as a wake-up call for authorities to act decisively in strengthening the domestic market. In response, Indonesia’s capital market authorities announced eight initiatives aimed at accelerating capital market reform. These initiatives consolidated into four key pillars: liquidity, governance, transparency, and synergy. They are collectively designed to address the long-standing challenge of limited market depth in Indonesia’s capital market. Yet the real test lies in the details. Authorities and related stakeholders need to ensure that these reforms are well executed, aligned with public interest, and sustainable over time. Only then can the reform agenda restore investors’ confidence and transform the capital market into an engine of growth.