* MSCI removes six firms from Indonesia index, 13 more

from small-cap index

* Jakarta equity market drops nearly 2%, some affected

stocks tumble around 10%

* Authorities and investors see MSCI move as expected and

positive

* MSCI due to conclude its Indonesia review in June

(Adds comments from Astra Agro Lestari in paragraph 23)

By Gayatri Suroyo and Rae Wee

JAKARTA, May 13 (Reuters) - Global index provider MSCI

said it will cut six companies from its Indonesia index at the

end of May as it pushes for reforms in a market it has

criticised for lacking transparency, sending their shares

tumbling on Wednesday.

Two of the six had been flagged by Indonesian authorities

for having concentrated ownership, a focus of an MSCI review

into Indonesia's market due to conclude in June.

MSCI highlighted transparency issues in Indonesian equities

in January, sparking a market rout on fears of a downgrade to

"frontier" status, which led authorities to step up efforts on

market integrity reforms.

On Wednesday, Jakarta's main stock index dropped

1.98% to close at its lowest in over a year on MSCI's

announcement, although investors and the government said it had

been largely anticipated.

Market participants said the culling could pave the way for

MSCI to soon lift a block on adding Indonesian companies to its

indexes, citing investor-friendly reforms authorities have

taken.

"We see a high probability that Indonesia avoids a downgrade

to Frontier Market status," said Ari Jahja, head of Indonesia

research at Macquarie Capital.

Gary Tan, a portfolio manager at Allspring Global

Investments, said the rebalancing from MSCI was a "constructive

step in clearing out weaker governance names, supporting

Indonesia's push to improve overall market quality".

"We expect continued pressure into the May 29 rebalance and

early June as passive funds adjust," said Tan, who remains

selectively positioned in the market, preferring higher quality

and liquid names.

After the market close, index provider FTSE Russell also

said it will delete Indonesian shares with high shareholding

concentration, effective June 22.

Foreign investors have sold about $2.2 billion worth of

Indonesian stocks this year, exchange data showed. Goldman Sachs ( GS )

estimates an outflow of about $1.6 billion due to the

rebalancing.

TYCOON-LINKED COMPANIES AFFECTED

MSCI removed Amman Mineral International, Chandra

Asri Pacific, Dian Swastatika Sentosa,

Barito Renewables Energy, Petrindo Jaya Kreasi

and Sumber Alfaria Trijaya from its

Indonesia Index, while another 13 companies were dropped from

its small cap index list.

Shares in most of the affected companies tumbled around 10%.

Sumber Alfaria Trijaya was an exception, unchanged by closing

time, as the mini market operator was moved to MSCI's Indonesia

small-cap index.

The selling was concentrated in tightly-held names with low

free floats that lack active foreign ownership, Allspring's Tan

said.

Amman Mineral, Barito Renewables and Dian Swastatika were in

the top 10 constituents of Indonesia's stock exchange as of

March 2026.

The chief capital market supervisor at Indonesia's Financial

Services Authority (OJK), Hasan Fawzi, said market reactions

were within normal ranges, suggesting no panic selling of

shares.

MSCI's decision reflected reform measures launched by

Indonesia since February, he said, which included requiring more

details on stock ownership and a higher level of freely

tradeable shares.

"Of course bolder reforms on market integrity, with a goal

of making our market more credible and investable ... will be

continued in the medium to long term," Fawzi said.

Barito Renewables and Dian Swastatika were among those

previously flagged by authorities for having highly concentrated

ownership structures.

Indonesian business magnate Prajogo Pangestu has controlling

stakes in Chandra Asri, Barito Renewables and Petrindo Jaya

Kreasi, while Dian Swastatika is part of the Sinar Mas Group,

one of the country's largest conglomerates, owned by the

billionaire Widjaja family.

The companies did not immediately respond to Reuters emails

seeking comment.

The small-cap companies affected include state miner Aneka

Tambang, several palm oil companies such as

conglomerate Astra Group's Astra Agro Lestari, and

Sinar Mas Group's real estate firm Bumi Serpong Damai.

Astra Agro said it respects MSCI's decision and the company

remains focused on delivering its operational commitments.