Indonesia Stock Exchange (IDX) data show that tech stocks were among the biggest gainers, that the technology subindex IDXTECHNO saw the strongest rally and that a tech company conducted the biggest initial public offering (IPO) this year – and in IDX history.

“There is a trend abroad, in the United States and in Europe, where technology stocks are blooming, and [Indonesia] has begun to see that too in 2021,” IDX president director Inarno Djajadi said on Dec. 9.

The IDXTECHNO rose 696.59 percent year-to-date (ytd) to 7,758 points as of Nov. 30, dwarfing the second-biggest gainer on the local bourse, the transportation subindex IDXTRANS, which rose 56.56 percent ytd over the same period.

Indonesia’s tech stock euphoria was driven by a combination of expected strong digital economy growth, a shift in consumption toward online platforms and unicorn listings announced over the course of the pandemic.

The IDXTECHNO began to spike in June after media reported that PT Bukalapak.com (BUKA) – one of the country’s fastest-growing e-commerce platforms – filed for its IDX listing, but the subindex has shed a chunk of its value since peaking at 11,997 points on Aug. 6.

Analysts had warned that companies would see their valuations tumble if they failed to deliver the sizable profits investors expected.

A global sell-off in tech stocks as central banks, particularly the US Federal Reserve, move toward monetary tightening, and China’s crackdown on Big Tech hurt sentiment in the later part of the year.

Read also: Fed signals three rate hikes in the cards in 2022 as inflation fight begins

While the IDXTECHNO subindex reflects 27 companies, Bukalapak, data center provider DCI Indonesia (DCII) and media conglomerate Elang Mahkota Teknologi (EMTK) together account for 75 percent of its weighting.

Big gains, big risks

Bourse data show that three IDXTECHNO companies were among the top 10 gainers in the first three quarters of the year: software provider PT Telefast Indonesia (TFAS), online marketing firm PT Digital Mediatama Maxima (DMMX) and DCI Indonesia.

As of Dec. 23, Telefast shares gained 2,672 percent ytd, Mediatama Maxima gained 1,018 percent ytd and DCI gained 6,857 percent ytd. The latter was dubbed by Bloomberg in November as “the world’s best-performing initial public offering this year.”

Thendra Crisnanda, the former head of research at MNC Sekuritas, said there were big risks of investors buying tech stocks out of FOMO – fear of missing out – rather than based on a thorough understanding of a company.

“Long-term optimism can have a negative impact if realizations do not meet expectations, and usually these [expectations] are not met,” he said. 

A case in point, Buakalapak shares have lost around half of their value since the IPO, tumbling to Rp 454 apiece as of Dec. 23, as the e-commerce company booked a net loss in the third quarter despite rising revenue.

Bukalapak’s net loss narrowed 19 percent year-on-year (yoy) to Rp 1.1 trillion in the January-September period while revenue rose 42 percent yoy.

EMTK shares, meanwhile, have gained almost 50 percent ytd as of Dec. 23 even though the company’s net profit narrowed 54.44 percent yoy to Rp 217.12 billion in the first three quarters.

DCII shares went up 112-fold ytd to 59,000 apiece on June 16, before cooling down to 36,525 apiece on Dec. 13 as investors cashed out.

DCII shares had shot up in late May after billionaire Anthoni Salim, heir of Salim Group, which owns the Indomie instant noodle brand, increased his stake in the company from 3.03 percent to 11.12 percent, a transaction valued at Rp 1.01 trillion.

Biggest IPO ever

The tech industry delivered this year the biggest IPO ever for IDX when Bukalapak listed in July, an event expected to spur regulatory changes and IPO enthusiasm.

Bukalapak raised around Rp 21.9 trillion (US$1.5 billion), worth around 25 percent of its enlarged capital, taking the title of biggest IDX listing from coal miner PT Adaro Energy that had raised $1.3 billion in 2008.

Read also: Bukalapak, first unicorn to list on IDX, gains 25% on day one

Analysts say Bukalapak’s IPO, also the first unicorn listing in Southeast Asia, sets the tone for future tech listings in Indonesia, with unicorns GoTo (valued at $18 billion) and Traveloka (valued at $3 billion) exploring a similar move.

BUKA rose 24.71 percent to Rp 1,060 apiece during the first hour of trading on Aug. 6, despite booking a net loss of Rp 1.35 trillion last year, signaling strong investor appetite for fast-growing tech companies.

“We hope that Bukalapak can become an inspiration for unicorns, centaurs and other tech companies and make IDX their house of growth,” said IDX’s Inarno on Aug. 6.

The Financial Services Authority (OJK) changed several listing rules this year to accommodate unicorns, such as erasing a requirement for companies to be profitable. Bukalapak was the first company to benefit from this rule.

In December, the OJK revised regulations to allow for multiple voting shares (MVS) and plans another revision to allow for special purpose acquisition vehicles (SPAC).

IDX indicated in July that it was eyeing at least six homegrown unicorn listings: ride-hailing firm Gojek, e-wallet OVO, online travel agent Traveloka, e-marketplaces Bukalapak and Tokopedia and logistics firm J&T Express, which could collectively add Rp 553.9 trillion to the bourse’s market capital. 

IDX assessment director I Gede Nyoman Yetna noted that the bourse was also eyeing 43 homegrown centaurs (start-ups valued above $100 million) that include e-wallet DANA, e-marketplace Blibli and health tech start-up Halodoc.

Read also: Unleash the unicorns: IDX expects strong market cap growth

“Indonesia is following in the footsteps of other markets, such as the United States and Singapore, to capitalize on the tech IPO boom,” wrote state-owned lender Bank Mandiri of the regulatory changes in a recent whitepaper.

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