Why Indonesia’s Emerging Market Status Is Under Threat

The labels used by global investors to categorize countries can shape how trillions of dollars move across markets and how easily governments and companies can raise money. So when MSCI Inc. warned on Jan. 28 that it may downgrade Indonesia from an “emerging” to a “frontier” market, it triggered one of the worst routs in the nation’s stock market in decades.

The warning crystallized long-standing concerns over Indonesia’s patchy record in enforcing good corporate governance, fair dealing in its financial markets and transparency around the ownership of assets.