Indonesia's former trade minister has accused two major Singaporean state-owned investment institutions of driving a sharp decline in Indonesian equities, allegations that Temasek Holdings and the Government of Singapore Investment Corporation (GIC) have both denied.

Last week, MSCI Inc announced plans to remove Indonesia from its global indexes unless significant improvements in market governance are made. The news sent Indonesian stock benchmarks tumbling by the largest margin since the 1998 Asian financial crisis.

Former Indonesian Trade Minister Muhammad Lutfi claimed on social media that Temasek and GIC wield considerable influence over MSCI, and that Singapore used both institutions to pressure the index provider. In a video posted on Instagram, he said: "They pressured MSCI, threatening to downgrade Indonesia to standalone market classification, creating massive panic that caused the index to crash, after which they could acquire quality Indonesian assets at a discount."

Wai Hoong Fock, Temasek's head of Asia-Pacific operations outside China and India, responded to questions at a technology industry briefing in Singapore, stating that Lutfi's allegations are entirely baseless and clearly untrue: "Temasek as an institution and its staff have never contacted MSCI, nor have they influenced any of its decisions."

A GIC spokesperson also denied the allegations, noting that the sovereign fund has been invested in Indonesia for more than 30 years. In a statement, the fund said: "The claims made against GIC and our staff are untrue. Our investment decisions are not determined by index classifications or top-down market judgments, but rather by the fundamentals of the companies and assets we invest in."

MSCI did not immediately respond to requests for comment. Indonesian authorities are working to avoid the downgrade, with MSCI expected to make a final decision before June 30 next year. The Indonesia Stock Exchange announced on Monday, after meeting with MSCI representatives, that it will remove companies with highly concentrated shareholding structures from its benchmark index constituents.