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Lot-size change has yet to affect the bourse
In a bid to pump up market liquidity and entice more retail investors, the Indonesian Stock Exchange (IDX) has started to modify its lot and tick sizes
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n a bid to pump up market liquidity and entice more retail investors, the Indonesian Stock Exchange (IDX) has started to modify its lot and tick sizes.
But after two days of trading, analysts say the move has yet to have any measurable impact.
The country's bourse has reduced its trading sizes to 100 shares per lot from 500 shares starting on Monday. It has also increased the maximum volume order to 50,000 lots from 10,000 lots and simplified the number of categories of stock prices to three from five.
'We have yet to see the significance of the policy affecting stock trades in the bourse. Market sentiment is not quite positive enough for the fraction changes to actually influence the trade,' Trust Securities analyst Reza Priyambada said.
The Jakarta Composite Index (JCI) ' the main price barometer at the IDX ' ended down by 0.13 percent at 4,202.80 on Monday, compared to 4,257.66 in the previous trading session before the lot size was changed.
The index concluded trading at 4,175.80 on Tuesday, down 0.64 percent compared to a day earlier.
The bourse recorded trade frequency of 139,455 transactions on Monday, compared to 95,832 on Friday. Trade value, however, dropped from Rp 3.35 trillion on Friday to Rp 3.11 trillion on Monday.
As of Tuesday, average daily value along 2014 stood at Rp 3.29 trillion, down by 47.19 percent compared to last year's end of trading season of Rp 6.23 trillion.
'Market players tend to wait and see and have yet to enter the market,' Reza said, pointing at the bourse's current red indices.
Hauled back by a falling rupiah and lackluster performance in regional economies, JCI ended its 2013 trade at 4,274.18 ' a 0.98 percent drop from 4,316.69 in year-end trade the previous year.
Analysts said that in addition to fears over the US Federal Reserve's plan to scale down its stimulus package, foreign investors had sold their Indonesian stocks out of concerns over the country's economy.
IDX president director Ito Warsito told reporters on Tuesday that investors applauded the new policy, as it enabled them to purchase stocks in more affordable lot sizes.
He said that as trade with altered lot and tick size had only been running for two days, investors might need more time to adapt to the altered mechanism.
He also encouraged investors to be more patient in gaining returns, as stock prices might increase only gradually with narrowing price groups, fraction and maximum price movements.
'The quiet trading these past few days was more likely affected by current market conditions, and not the changed lot size,' Ito explained.
Indosurya Securities analyst William Surya Wijaya welcome the new policy for giving the opportunity for investors to purchase large cap defensive stocks such as shares of consumer colossus PT Unilever Indonesia (UNVR) and diversified conglomerate PT Astra International Indonesia (ASII) at more affordable prices. William said that the reduced fraction would also make stocks traded in the bourse more immune to steep price decline, but would probably see prices take more time to climb up.
He said the changed lot and tick sizes would affect investors psychologically as they might feel burdened buying or selling huge numbers of lots, despite purchasing or offering them at usual values.
'Nevertheless, investors are currently enjoying purchasing big cap stocks and they will soon adapt to the new policy in upcoming days.'
