The new 7 percent limit-down rule introduced by the Indonesia Stock Exchange (IDX) last week has helped slow the fall in the exchange’s main price benchmark the Jakarta Composite Index (JCI), as the rout continued to hit the local market amid uncertainties surrounding the COVID-19 global pandemic.

The new regulation, issued on Thursday last week and coming into force on Friday, is part of a series of regulations rolled out by the IDX recently in an attempt to calm the market following a historic crash on Monday, during which the JCI nosedived 6.58 percent to a three-year-low, reflecting a fall across all blue-chip stocks.

On that day, mining company PT Bukit Asam sank 9.8 percent, consumer goods company PT Indofood Sukses Makmur plunged 8.27 percent, Bank Central Asia (BCA) 6.69 percent, and telecommunications firm PT Telekomunikasi Indonesia (Telkom) 6.67 percent.

This week, despite still being in the red, those shares have seen falls that have been less steep. On Wednesday, Bukit Asam dropped 6.73 percent from the previous trading day, Indofood was down 0.82 percent, BCA fell 2.34
percent and Telkom recorded a downturn of 4.42 percent. Meanwhile, the main gauge was off by 2.83 percent on Wednesday.

Jasa Utama Capital equity analyst Chris Apriliony told The Jakarta Post on Tuesday that the newly imposed 7 percent limit-down was effective enough in holding back the overall fall of the local index as “it minimizes the impact of traders who are panicking and thus are selling their stocks at a very cheap price”.

The limit-down is the maximum share price loss allowed before trading is automatically stopped.

“The fall is mainly due to panic selling as [the weak performance] has not been reflected in the companies’ fundamentals in general,” Chris said, in explaining the reason behind the downward trend in share prices.

Following the crash on Monday last week, the bourse has issued a series of measures to cope with the market rout.

The 7 percent limit-down was issued on Tuesday, just a day after the stock exchange operator lowered the daily limit on share price loss to 10 percent.

The exchange also issued a new trading suspension regulation that stipulates that the IDX will halt stock trading for 30 minutes if the JCI falls by more than 5 percent.

If the index keeps falling by more than 10 percent after the first suspension is lifted, the bourse will halt trading for another 30 minutes. Trading will halt for the whole session if the JCI continues to plunge deeper than 15 percent.

“In a matter of days [the regulation] was changed from 10 percent to 7 percent. That actually gives an impression of a lack of confidence,” Trimegah Securities head of research and foreign institutional equity Sebastian Tobing told the Post on Tuesday, explaining that the previous regulation change to the 10 percent mark was understandable, but the follow-up policy created negative statement.

“A cap like that is effective if the issue is new. These days the issue remains the same: coronavirus,” Sebastian said via a messaging app, adding that the policy was only effective in slowing down the fall of the main gauge.

The JCI has fallen 31 percent year-to-date. On Wednesday, the JCI touched its lowest level since October 2015 as it closed at 4,330.67. On Thursday, the index lost 5.4 percent to close at 4,096.11, triggering a circuit breaker for the fourth time in six sessions.

Meanwhile, Reuters reported the Philippine stock exchange plunged 24 percent on Thursday on reopening after a two-day hiatus, while other Southeast Asian stock markets also sustained heavy losses on fears over the economic damage from the coronavirus pandemic

Singapore shares dropped 4.3 percent, heading for a seventh straight session of losses, while Malaysian stocks slid 1.8 percent and the exchange is set for a sixth consecutive session of losses, as the country observes a two-week partial lockdown. (ydp)

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