Stock Market Reactions to MSCI Market Accessibility and Market Classification Announcements: Evidence from Indonesia

Abstract

Background: Global index providers such as MSCI influence international investment decisions by  assessing market accessibility and classification, which may affect investor expectations and stock-price movements. Aims: This study examines the reaction of the Indonesian stock market to two MSCI announcements in 2026: the market-accessibility announcement of 27 January and the Market Classification Review of 23 June, which retained Indonesia as an Emerging Market. Study Design: An event study design was used to assess abnormal returns around both announcements. Place and Duration of Study: The analysis used secondary data for IDX30 constituent companies listed on the Indonesia Stock Exchange, covering five trading days around each event. Methodology: Abnormal returns were estimated using the market-adjusted model, with the Jakarta Composite Index serving as the market benchmark. The event window comprised t−2 to t+2. For the first event, firms were divided into high- and low-foreign-ownership groups using the median foreign ownership level. One-sample t-tests and Wilcoxon signed-rank tests were applied according to the distribution of the data. Results: For the first event, a significant negative abnormal return occurred at t−1, followed by a significant positive abnormal return at t0. The positive value indicated that IDX30 stocks outperformed the overall market during the market-wide decline. Firms with low foreign ownership showed greater fluctuations than firms with high foreign ownership. For the second event, no significant abnormal returns were observed during the event window. Conclusion: The market reacted more strongly to the announcement associated with greater uncertainty than to the subsequent classification announcement. Foreign ownership was also associated with differences in the magnitude and stability of market responses.