Should Malaysia learn from Indonesia’s market crash? The exchange CEO weighs in.

(Kuala Lumpur, 29th)
Indonesia’s stock market recently came under scrutiny after more than 200 constituents of its benchmark indices were found to have free-float levels below 15%. This prompted MSCI to raise concerns over the market’s investability and even consider a potential downgrade from emerging market to frontier market status. The warning triggered heavy selling, with Indonesian equities suffering their sharpest two-day decline in nearly three decades. The episode has led to questions over whether Malaysia should take heed.

The discussion gained traction following recent moves by Bursa Malaysia, which lowered the minimum free-float requirement for certain large IPOs post-listing to 18%. In the past, some major IPOs with free float below the standard threshold were also approved for inclusion in the FBM KLCI, raising concerns about whether Malaysia could face similar risks.

Addressing these concerns at a results briefing today, Bursa Malaysia CEO Datuk Fad’l said Malaysia’s situation differs significantly from Indonesia’s.

He explained that free-float calculations in Malaysia are governed by clearly defined parameters, with requirements adjusted according to a company’s market capitalization.

“Bursa Malaysia operates within a clear regulatory framework that allows companies some flexibility in determining their public shareholding within prescribed limits,” he said.

Fad’l added that Indonesia’s approach primarily affects large-cap companies and may eventually revert to the 25% free-float standard. Malaysia, however, continues to operate under its existing rules, and MSCI’s actions regarding Indonesia have not affected the Malaysian market.

“Compared with Indonesia, Malaysia’s 25% free-float benchmark is higher and more robust, and MSCI has not indicated any change in how it assesses free float for Malaysia.”

He also emphasized that Malaysia maintains strong disclosure and transparency standards. When MSCI assesses investability, it considers multiple factors—such as liquidity, free-float-adjusted market capitalization, and market accessibility—rather than free float alone.

“In the past, isolated cases of companies with free float below 25% did not raise concerns from MSCI,” he noted.