The Jakarta Post
The Indonesia Stock Exchange (IDX) is shortening trading hours starting next Monday to adjust to shorter bank settlement hours and the work-from-home policy implemented on account of COVID-19, potentially resulting in lower trading value in light of high volatility.
Stock trading hours will be shortened to four hours from five-and-a-half hours previously, according to an IDX announcement. The bourse will open as usual at 9 a.m. Jakarta time, but close trading one hour earlier at 3 p.m. The lunch break is also extended by half-an-hour to two hours between 11:30 a.m. and 1:30 p.m. from Monday to Friday. The policy will come into effect on Monday, March 30.
“Transaction value could decrease slightly by around 5 to 10 percent because investors will have less time to put in their orders,” University of Indonesia stock market expert Budi Frensidy said on Thursday. The average daily transaction value currently stands at Rp 6.8 trillion, according to IDX data.
Budi added that it was the first time in history that the IDX had made such a move. “The IDX has suspended trading for a few days, but it has never shortened the trading hours before,” he told The Jakarta Post.
With the new hours, the JCI could have more stable movement as investors would have less time to sell their stocks amid the pandemic panic, said Budi. Stock trading at the IDX hit circuit breakers five times this month as investors exited risky investments including stocks over fears of a COVID-19-driven global recession.
As of Thursday, the benchmark Jakarta Composite Index (JCI) was among the worst-performing indexes around the world, having declined 31.1 percent so far this year to 4,338. The Philippines dropped 30.9 percent, Japan tumbled 21 percent, Australia declined 24.5 percent and the US went down by 25.7 percent.
The new schedule follows the Financial Services Authority’s (OJK) instruction letter for stock trading to adjust to Bank Indonesia Real Time Gross Settlement (BI-RTGS) shorter operating hours.
“In maintaining the stability of the capital market industry and in line with the Indonesian President’s direction to support working from home to minimize the spread of COVID-19 […] and in line with the operational schedule adjustment and public service of Bank Indonesia, additional measures need to be taken to maintain a stable capital market,” the OJK wrote in the letter.
The move adds to a previous announcement that scrapped pre-opening trade, which normally takes place between 8:55 a.m. and 8:59 a.m. as the local stock market “faces pressures” and the IDX is “taking steps to minimize pressures on the Indonesian stock market”.
Trading hours were also shortened in Malaysia, with Bursa Malaysia cutting market hours from 9 a.m. to 5 p.m. to only operate between 10 a.m. and 3 p.m. during the Movement Control Order period imposed by the Malaysian government.
US Treasury Secretary Steven Mnuchin also said on March 17 that the Trump administration would consider shortening the trading hours at the New York Stock Exchange (NYSE) in a bid to keep the market open despite volatility caused by the COVID-19 pandemic.
But the statement was quickly denied by the NYSE, saying it was in constant dialogue with the US government and regulators and had “no current plans to shorten the trading day”, as quoted by Bloomberg.
Koneksi Kapital analyst Alfred Nainggolan said the potential decrease in transaction value would be insignificant as the OJK had announced the plan in advance, enabling market players to adjust their positions accordingly.
“Market players would shift their trading activities in accordance with the specified time,” Alfred said, adding that he believed the move would have no effect on stock prices.
“The index’ movement would depend on market sentiment, and since the COVID-19 pandemic has yet to show any signs of slowing, I think the market will continue to fluctuate,” added Alfred.
As of Thursday, Indonesia had recorded 893 confirmed COVID-19 cases with 78 deaths and 35 recoveries. Meanwhile, the coronavirus has infected more than 500,000 people worldwide and killed more than 24,000.