T

he Indonesia Stock Exchange (IDX) plans to introduce the long awaited reduced shares lot size on Dec. 1 at the stock market.

The new lot, which will compose of 100 shares from the previous 500 shares each, aims to increase market liquidity and attract more retail investors.

According to IDX president director Ito Warsito, the IDX still has several tests to do before realizing the plan. '€œWe are still working on some minor technical matters, but the target is to go live on Dec. 1,'€ he said at the Financial Services Authority'€™s (OJK) office on Thursday.

Following the reduction, shares of big cap companies can be purchased for a lower price per lot.

Shares of automotive giant PT Astra International (ASII), the second-biggest company by market capitalization at the IDX, can be purchased for around Rp 650,000 (US$63) per lot, lower than the current price of Rp 3.25 million per lot.

Shares of state-owned PT Telekomunikasi Indonesia (TLKM) '€” the fourth-biggest in terms of capitalization '€” will also be lower, with the price tag set at Rp 1.19 million per lot from the current Rp 5.97 million per lot.

Ito said he was optimistic the new size would be able to attract a higher number of retail investors, citing the potentially more affordable price. '€œMarket liquidity will hopefully increase as well,'€ he said.

According to the Indonesian Central Securities Depository (KSEI), there were 301,021 registered individual investors as of June 2013, up by 9.5 percent from 274,956 a year ago.

Meanwhile, data from the IDX shows that total equity trading value rose by more than half to Rp 858.41 trillion and the trading frequency grew 40 percent to 20.41 million times during the first six months of 2013.

About 42 percent of total trading was made up by foreign investors and the other 58 percent by domestic traders.

Nurhaida, OJK commissioner for capital market supervision, said to provide more options for investors, which in the end would lure new investors to enter the stock market, the OJK would hold meetings with more than 100 private companies in three cities between September and October.

The companies are those considered by the OJK as '€œhaving the potential to go public'€, according to Nurhaida.

'€œThe first meeting will be held in Jakarta in September. Then we will hold another meeting in Surabaya [East Java], also in September, and in Makassar [South Sulawesi] the next month,'€ she said.

Besides the new lot size, Nurhaida said both the OJK and IDX still relied on the tax incentive regulation issued in 2007 to ensure market liquidity.

Under the regulation, a publicly listed company will obtain a 5 percent tax reduction if the amount of shares issued to public has reached a minimum 40 percent of its enlarged shares.

'€œThe number of companies that have received the tax reduction has increased to more than 100 from around 80 in 2007,'€ she added.

She acknowledged the OJK had received requests from several firms to reduce the floating shares requirement to 30 percent, but no formal talks had been held between OJK, the companies and the tax office.

As of now, the total number of listed companies at the IDX is 481 firms. Seven more companies are currently waiting for the OJK'€™s approval to go public this year.

Investa Saran Mandiri analyst Jhon Veter said the new lot size would probably attract new investors, but he insisted it was more important to provide stock market education to the public.