Adds market reaction and investor comment throughout

SINGAPORE, Feb 10 (Reuters) - Index provider FTSE Russell said it postponed a review of Indonesia, following rival MSCI in raising concern about how freely stocks trade, as governance and market opacity worries shake investor confidence in Southeast Asia's biggest economy.

MSCI MSCI.N and FTSE indexes are widely used as benchmarks for investors and are tracked by billions of dollars in passive funds, meaning their decisions are capable of driving money flows.

About $120 billion has been swept away from the benchmark Jakarta Composite .JKSE since MSCI warned last month the country risked a downgrade to frontier from emerging status because available market data obscures stock ownership and trading practices.

Last week, Moody's cut its credit rating outlook for Indonesia and, taken all together, the moves reflect concerns that President Prabowo Subianto's economic stewardship has hindered investment inflows.

FTSE Russell made no change to Indonesia's designation as a secondary emerging market, but flagged concerns similar to those raised by MSCI about how difficult it is to determine the levels of free-floating, or freely-tradable, stock.

In a statement posted on its website on Monday, the firm said it would postpone an index review planned for March and provide another update before a global review is due in May. A country classification announcement is due on April 7.

With immediate effect, FTSE said, newly listed Indonesian stocks will not be added to its products nor will they be updated to reflect other additions, deletions or changes in weighting that usually form part of regular index reviews.

REFORM PROMISES

Indonesian shares .JKSE and the rupiah IDR=ID were a little bit stronger in early trading and investors said that a move by FTSE was expected.

Indonesia has vowed to double free-float requirements and toughen disclosure rules for big shareholders so investors can more clearly see who owns what in the market and who is trading.

Exchange operator IDX said it met with FTSE on Monday and was told FTSE supported recently released reform plans. Bourse executives and financial regulators are due to brief MSCI this week on Indonesia's progress.

MSCI has also frozen updates for Indonesian securities in its products.

"The pause gives regulators time to fix free-float and data integrity issues properly, which should be supportive over the medium term," said Mohit Mirpuri, a fund manager at SGMC Capital, referring to FTSE's move.

Five senior officials at the stock exchange and regulator resigned following the recent selloff.

Broader concerns about Indonesia's investability, which were compounded when Prabowo's nephew was appointed to the central bank last month, come at an inopportune moment as global sentiment on emerging markets has turned positive.

(Reporting by Tom Westbrook and Ankur Banerjee in Singapore; Additional reporting by Stefanno Sulaiman and Ananda Teresia in Jakarta; Editing by Christian Schmollinger, Jacqueline Wong and Thomas Derpinghaus)

((tom.westbrook@tr.com; +65 6973 8284;))