President Hopes Indonesian Stock Market Capitalization Equals with ASEAN Bourse

Photo by Cabinet Secretary

JAKARTA (TheInsiderStories) – Indonesian President Joko Widodo hopes that Indonesia’s stock market capitalization will be parallel to the ASEAN bourse. Based on Financial Services Agency (OJK) data, the country’s capital market capitalization is only about 60 percent of Indonesia’s Gross Domestic Product (GDP) in 2016.

This is far behind compared to the growth of capital markets in other Asian countries. The Singapore market, for example, has a market capitalization of 120 percent of its GDP while Malaysia has reached 110 percent of its GDP.

This year, Indonesia Stock Exchange expect the market capitalization could penetrate to Rp7,000 trillion or around 58 percent of Indonesian GDP (approximately Rp12,400 trillion).

After meeting with the capital market players at Indonesia Stock Exchange (IDX) on July 4, Widodo expect the capital inflow to Indonesian capital market could grow double this year compared to last year worth of Rp126 trillion (US$9.47 billion) followed the positive momentum after Fitch Ratings, Moody’s, then Standard & Poors put Indonesia on the investment grade.

He noted, during January until May the capital inflows total foreign funds coming into Indonesia almost equal to last year’s figure worth of Rp124 trillion.

Widodo highly welcomed the positive performance of capital market reflected in a jump of IDX composite index and growing capital inflow. The Jakarta Composite Index (JCI) had touched 5,910 on Monday before ended to 5,890 yesterday cause of the profit taking action.

To improve the market capitalization of IDX, President urged foreign firms with their operations in Indonesia also list their shares on IDX. He also promised to push state-owned enterprises (SOEs) to list their shares and other instrument to finance their business

“We will invite foreign firms operating in Indonesia in good manner to also listing in Indonesia because their production activities are here. We also will encourage SOEs and its subsidiaries to raise fund through the capital market,” Jokowi told reporters on Tuesday.

According to him, if these companies listing in Indonesia, it will have a positive impact for the economy because these companies have considerable value.

During the meeting with Widodo, Chairman of OJK Muliaman Hadad, Finance Minister Sri Mulyani Indrawati and Governor of Bank Indonesia Agus Martowardojo, President Director of IDX Tito Sulistio have presented that some 52 foreign firms will be required to listing in Indonesia as half of their earnings come from Indonesia. Tito said, the companies engage in mining, property, and palm plantation is estimating has market capitalization above Rp400 trillion.

“They have listed their shares in their original countries such as Malaysia, Singapore, China, and Australia. We will also encourage them to get advantage from the capital market,” Tito said.

Tito added IDX has approached PT Freeport Indonesia and PT Newmont Nusa Tenggara go IPO (initial public offering) on IDX. He continued,  there are 200 companies also has possible to raises money from the capital funds are the lender of banks.   

At the same time, chairman of OJK stated tha if that some foreign firms with operation in Indonesia has planned listing in Indonesia, this would increase the market capitalization of the bourse.

“We will soon follow up the intention of President, revisit and harmonize the existing regulation which drag the listing and dual listing of foreign firms,” said Muliaman.

Dual Listing

Tito added that the government plans to encourage the listing of shares of companies in the Indonesian capital market one of them is also done through a dual listing for companies that are already listed on the capital markets of other countries.

Currently these efforts are still under review by the IDX and already getting a referral from the FSA in which the agency itself will provide relaxation or convenience for companies that are already listed and audited in the country.

“Our effort is how to facilitate them as an obstacle now is from the side of the rule and that there should be harmonization of example we’re disposable PT. FSA also will give relaxation to those already listed overseas,” he said.

Tito explained, IDX has been in talks with Malaysian bourse regarding dual listing for the companies of the two countries. He noted, the Indonesian capital market conditions that are constantly evolving which the market liquidity recorded a growth of 24 percent or an increase of four times that of Malaysia and two times that of Singapore.

Hadad added, that Indonesia’s efforts to increase domestic capital market capitalization is to do a dual listing, especially to encourage businesses to be able to get two sources of funding, not only in his own country but also from other countries.

(Written by Brigida Ernestina Elu Wea, Email: flo@theinsiderstories.com)