Index provider MSCI Inc raised fresh concerns on Thursday regarding Indonesia's investment appeal, highlighting issues with limited transparency in shareholding structures and the presence of coordinated trading, delivering another blow to one of the world's worst-performing major stock markets.

This warning comes just ahead of MSCI's decision next week on whether to downgrade Indonesia's market classification from "emerging market" to "frontier market," a move that could potentially trigger capital outflows of up to $13 billion.

Indonesia's capital market has been in a steep decline since January, when MSCI first flagged transparency issues and warned of a potential downgrade to frontier market status.

In its market accessibility review published on Thursday, MSCI revised Indonesia's information flow standards to "negative." This reflects a lack of clarity in shareholding data and market activity, which not only hinders proper price discovery but also limits global investors' ability to accurately assess a company's true free-float shares.

The initial warning in January prompted authorities to roll out a series of reforms, including doubling the minimum free-float requirement for listed companies to 15%. It also led to the collective resignation of top executives at the stock exchange and market regulator one afternoon in January.

In April, MSCI extended its review of the Indonesian market and subsequently removed six companies, mostly linked to tycoons, from its indexes in May, causing another significant drop in share prices.

As one of the world's largest market index providers, a downgrade decision by MSCI would compel passive investment funds to sell shares and put pressure on active fund managers benchmarked against MSCI indexes to reduce their holdings.