Financial Services Authority (OJK) reported in the fourth months of 2020, fund raising through the capital market worth of Rp28.3 trillion (US$1.83 billion) with 22 new issuers - Photo by TheInsiderStories

JAKARTA (TheInsiderStories) – Indonesia’s benchmark stock index is expected to gain further this year, driven by capital inflows (after suffering outflows last year), as well as projected improvement of the domestic economy, analysts said.

The Jakarta Composite Index (JCI) gained 0.3 per cent to close at 6,680.619 on Monday (29/01). The JCI has already risen 5.1 per cent this year, from the 6,355.65 figure recorded at end-2017.

In 2017, the JCI gained 20 per cent, winding up on a high note, despite escalating political tensions across the country. 37 newly-listed companies joined the parade.

As for prospects of the market for 2018, most analysts remain bullish, as they are confident that the market still has the prospect to surge this year, banking on high investor confidence.

Shares of companies in energy, banking and infrastructure sectors are expected to gain this year on the back of the recovery of oil and commodity prices.

The market capitalization of listed companies as a percentage of the country’s gross domestic product was 45.67 per cent of GDP in 2016. This is relatively low compared to Thailand and Malaysia, at 104 per cent and 156 per cent of GDP, respectively.

Indonesia also suffers from a small investor base, with the number of mutual fund investors in the country standing at only 0.13 per cent of the total population, with managed funds valued at Rp 338.6 trillion, or just 2.93 per cent of GDP.

The self-regulatory organization of the Indonesia Stock Exchange (IDX), as well as authorities have exerted themselves to offer incentives to encourage more companies to go public. The country’s stock exchange, the IDX, has streamlined issuance procedures to encourage more IPOs. Meanwhile, the Financial Services Authority (FSA) has rolled out a number of policies to support the growth of the stock market over the last few years.

In the pipeline: the FSA plans to introduce a so-called ‘Electronic Trading Platform’ that will facilitate transactions for government securities outside the market. The Authority also seeks to establish a Bond Development Team in cooperation with Bank Indonesia and the Finance Ministry, and is finalizing a Global Master Repurchase Agreement.

The FSA has also relaxed rules for IPOs of small and medium enterprises (SMEs). This will help facilitate start-ups in listing their shares on the stock exchange. Currently, SMEs must have a minimum asset value of Rp 100 billion before they are allowed to list their shares, and can only raise a maximum at Rp 40 billion in funds.

The FSA now allows companies with assets of less than Rp 50 billion to launch an IPO. Of the 37 companies that went public last year, two are startups, namely, PT M Cash Integrasi and PT Kioson Komersial Indonesia.

In addition, there has also been collaboration between the country’s stock exchange and state lender PT Bank Mandiri Tbk (IDX: BMRI), through a program called the IDX Incubator. Under this program, stock exchange management will provide training programs, working space as well as other facilities to nearly 30 startups.

The IDX, in partnership with the Indonesian Accountant Association, is currently setting up a special board to assist startups and SMEs to tap into capital markets.

Catalysts will stimulate the JCI to gain further this year. First, the government’s policy to boost infrastructure projects throughout the country will benefit construction companies and mutual funds investing in the sector, such as Bahana Dana Infrastruktur, by PT Bahana TCW Investment Management.

IPOs In Pipeline

Tito Sulistio, President Director of the Indonesian Stock Exchange, claims that 140 companies have expressed interest in listing their shares. He also mentioned that several subsidiaries of state-owned enterprises (SOEs) have prepared to launch their own IPOs.

SOE subsidiaries planning to list shares on the Indonesian Stock Exchange include PT PP Urban, PT PP Energy, PT PP Infrastructure, PT Wika Realty, PT Tugu Pratama Indonesia, PT Tanjung Priok Port and PT Indonesia Vehicle Terminal.

Indonesia Stock Exchange’s IPO Pipeline in 2018

Source: IDX

IDX is also ready to provide incentives and facilities for companies that will launch IPOs. According to Tito, listing costs on the exchange are reasonable, ranging from Rp 50 million to Rp 200 million. He is still hoping that large-scale companies such as PT Freeport Indonesia can list its shares on the Indonesian Stock Exchange.

Last year, there were 31 companies that began listing on the stock exchange. However, the value of funds raised through IPOs over the year reached only Rp 7.89 trillion, lower than the previous year’s Rp 12.11 trillion. Some of those companies listed their shares during the last month of the year.

Director of Corporate Assessment of IDX Samsul Hidayat added that there are currently 4 companies that will list initial shares in early 2018: PT Sky Energy Indonesia, PT LCK Global Kedaton, PT Borneo Olah Sarana Sukses and PT BTPN Syariah. Samsul said the amount of funds to be raised through the IPOs could reach Rp 1.5 trillion.

The subsidiary of PT Indosat Tbk (ISAT), PT Artajasa Pembayaran Elektronis (Artajasa), will add to the list of companies to be listed on the IDX.

Artajasa, the provider of electronic payment services, has submitted this plan to the exchange authority and has prepared a prospectus, using the financial statements of the audit results ending on Sept. 30, 2017. The financial statement will be submitted to the FSA.

Meanwhile, medium-size mining company PT Borneo Olah Sarana Sukses (IDX: BOSS) set its initial public offering price in a range of Rp350-Rp600 per share, which will enable the company to raise funds between Rp140 billion to Rp240 billion from the IPO.