* Reclassification to frontier status possible if no

progress by November 2026 review, MSCI ( MSCI ) says

* MSCI ( MSCI ) acknowledges recent transparency reforms from Jakarta

* Jakarta stock index down near 30% this year,

worst-performing major market globally

* MSCI ( MSCI ) tone constructive but conditional, investor says

(Adds comments from Indonesia's financial regulator in

paragraphs 10-11)

By Ankur Banerjee

SINGAPORE, June 23 (Reuters) - Indonesia held on to its

emerging markets status, for now, as global index provider MSCI ( MSCI )

on Tuesday extended its review to November to assess the slate

of measures rolled out by Jakarta, leaving the market facing

prolonged uncertainty.

Indonesian assets have been hammered since January, when

MSCI ( MSCI ) froze the country's stocks in its indexes and raised the

prospect of a downgrade to frontier status, pointing to opaque

ownership, weak free-float visibility and unreliable trading

data.

Tuesday's extension could spur a brief relief rally, though

with most of the worries over Indonesia lingering, sentiment

will likely remain subdued on a market that has turned from

darling to deadweight.

Since January, Indonesia has announced measures, including

moves to raise free-float levels, to help allay some of those

concerns. On Tuesday, MSCI ( MSCI ) acknowledged transparency reforms.

"While these announcements represent a step in the right

direction, what matters for international institutional

investors is the consistent implementation and sustained effect

of these measures across the market," MSCI ( MSCI ) said in a statement.

The global index provider said in its 2026 market

classification review that it would consider options such as a

consultation on a downgrade to frontier status if sufficient

progress was not evident by the time of the November review.

Mohit Mirpuri, a fund manager at SGMC Capital in Singapore,

said the MSCI ( MSCI ) extension is a better outcome than many had

feared, noting the index compiler stopped short of launching a

frontier market consultation and explicitly acknowledged the

reforms.

"The tone was constructive but clearly conditional," he

said. "I think the immediate downgrade risk has been deferred

rather than eliminated. The MSCI ( MSCI ) overhang likely remains ...

which may keep some foreign investors cautious."

MSCI ( MSCI ) in April had extended its review of Indonesian markets

to June and in May cut several companies, most of which were

tied to tycoons, from its indexes.

Indonesia's financial regulator said the MSCI ( MSCI ) announcement

would serve as momentum to strengthen and accelerate the capital

market reform agendas initiated since January.

The regulator said it will continue to communicate and

engage with global index providers as well as investors, to

"ensure that the reforms that have been and are currently being

rolled out can be comprehensively understood by the global

investment community."

WALL OF WORRIES FOR INDONESIA

Investor unease has been growing over President Prabowo

Subianto's spending agenda, which has supported initiatives such

as free meals to millions of people but has also contributed to

the rupiah sliding to record lows, leaving the broader

investment backdrop for the $1.4 trillion economy looking

fragile.

Indonesia has been besieged by setbacks this year, with

credit-rating firms Moody's and Fitch cutting their debt rating

outlooks for Indonesia to negative earlier this year, citing

reduced policymaking credibility.

The benchmark Jakarta stock index has dropped nearly

30% this year, making it the world's worst-performing stock

market, with foreign investors net selling $3.89 billion worth

of Indonesian equities in 2026.

MSCI ( MSCI ) said last week there were signs of coordinated trading

distorting price formation, as well as inadequate provision of

detailed market information in English.

A downgrade would be devastating to Indonesia, putting it on

par with frontier markets such as Bangladesh, Sri Lanka and

Pakistan. It could also trigger as much as $13 billion in

outflows from Indonesian equities, Goldman Sachs has estimated,

at a time when the combined market value of Indonesian equities

has already shrunk to $601 billion from more than $900 billion

in January.

MSCI ( MSCI ) said the transparency issues relate directly to the

information flow and market infrastructure pillars of its market

accessibility framework, with participants raising "profound

investability concern" stemming from them.

The index provider added it would continue to assess the

scope, consistency and sustained effectiveness of the reforms

from Jakarta in the context of free-float determination and

broader investability assessments.

"Our base case remains that Indonesia retains Emerging

Market status," SGMC Capital's Mirpuri said. "But the next few

months will be about execution, credibility and evidence rather

than further policy announcements."