Temasek & GIC deny ex-Indonesian minister’s claims they were behind MSCI downgrade threat, Indonesia’s stock market plunge

Singapore’s state investors Temasek and GIC have denied allegations by former Indonesian trade minister Muhammad Lutfi that they helped instigate Indonesia’s recent stock market rout.

Lutfi had accused the two institutions of pressuring global index provider MSCI to threaten a downgrade of Indonesia’s market status, with the aim of driving share prices down so foreign investors could buy Indonesian assets cheaply.

Temasek calls allegations “patently untrue”

According to Bloomberg, Fock Wai Hoong, Temasek Global Investments’ head of Asia-Pacific excluding China and India, rejected the allegations at a technology industry briefing in Singapore on Oct. 21.

Lutfi’s accusations “have no basis and are patently untrue”, Fock said.

He added that neither Temasek nor its employees had approached MSCI or influenced its decisions.

A GIC spokesperson also rejected the claims, noting that the fund had invested in Indonesia for more than 30 years.

“The allegations about GIC and our staff are untrue,” the spokesperson said.

GIC added that it bases investment decisions on individual companies and assets, rather than index classifications or broad assessments of a market.

Why MSCI is considering a downgrade

In an Oct. 15 statement, MSCI proposed reclassifying Indonesia from an emerging market to a standalone market, citing opaque share ownership, suspected coordinated trading and a lack of meaningful enforcement despite announced reforms.

Standalone status would remove Indonesian stocks from MSCI’s broader emerging-market indexes, potentially forcing funds tracking those indexes to sell their holdings. The warning triggered a record two-day sell-off that wiped out about US$82 billion in market value, before stocks recovered some ground on Oct. 20, The Straits Times (ST) reported.

MSCI’s consultation closes on Apr. 30, 2027, with a final decision due by June 30. It expects to proceed unless there is clear evidence of meaningful improvements in market governance and functioning.

Lutfi's allegations of Singaporean interference

In Instagram post on Oct. 20, Lutfi alleged that Temasek and GIC were using their influence over MSCI to push for Indonesia’s reclassification from an emerging market to a standalone market.

He also claimed to have received insider information that a GIC employee had pressured MSCI to downgrade Indonesia.

Lutfi alleged that earlier foreign capital outflows had failed to push Indonesian share prices low enough for foreign investors to buy back assets at their desired prices.

“The goal was one: create market panic so that prices correct sharply, then scoop up our strategic assets at discounted prices,” he wrote.

However, Lutfi did not provide evidence to substantiate his allegations in his post.

CNN Indonesia also reported that there is no evidence in MSCI's announcement to confirm Lutfi's allegations concerning Singapore's involvement.

Lutfi also linked the stock market turmoil to the ongoing dispute over transboundary haze, claiming both concerned control over Indonesia’s wealth.

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A post shared by Muhammad Lutfi (@m.lutfi)

IDX chief defends MSCI’s independence

Responding to the allegations on Oct. 20, Indonesia Stock Exchange (IDX) president director Jeffrey Hendrik defended the independence of global index providers.

“We have always believed, and continue to believe, that global index providers are independent,” he told reporters at the IDX building in Jakarta, according ST.

Jeffrey said IDX would focus on improving Indonesia’s stock market.

Mohammad Lutfi's terms as trade minister

Lutfi served as trade minister under then-president Joko “Jokowi” Widodo from December 2020 to June 2022. He left the post when Jokowi appointed Zulkifli Hasan as his replacement in a cabinet reshuffle on June 15, 2022.

He had previously held the same portfolio from February to October 2014 under then-president Susilo Bambang Yudhoyono.

In August 2023, Indonesia’s Attorney General’s Office questioned Lutfi as a witness in a corruption investigation involving export approvals for crude palm oil and related products, including cooking oil, Antara reported.

The case concerned export approvals issued during a domestic cooking oil shortage in 2022. According to Reuters, prosecutors alleged that permits had been issued to companies that had not fulfilled domestic supply requirements.

Antara reported in August 2023 that five people, including the Trade Ministry’s former director-general of foreign trade, had received prison sentences in the case.