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Jakarta Post

Indonesian bourse lowers expectations, pins hope on domestic investors amid volatility

  • Riska Rahman

    The Jakarta Post

Jakarta   /   Mon, April 27, 2020   /   04:26 pm
Indonesian bourse lowers expectations, pins hope on domestic investors amid volatility Employees walk near the screen of stock movements in the Indonesia Stock Exchange (IDX) building in Jakarta on Feb. 28, 2019. (Antara/Rivan Awal Lingga)

The Indonesia Stock Exchange (IDX) has set lower targets on daily transaction values and newly listed companies this year while relying more on domestic investors to cushion the volatility of stocks as it faces tougher challenges amid the COVID-19 pandemic.

IDX trading director Laksono Widodo said on Friday that the bourse expected this year’s daily transactions to reach an average of Rp 7 trillion (US$450.7 million), much lower than the Rp 9.5 trillion figure recorded last year.

“For the past few weeks, the average daily transaction is stable at Rp 6.5 trillion to Rp 6.9 trillion, so we expect this year’s average to be around Rp 7 trillion, assuming that the economy is going to rebound in the second half of this year,” he said during a virtual press briefing.

The steep decline in daily transactions had been happening since the beginning of the year, following a crackdown on stock pump-and-dump practices after the investment mismanagement case of state-owned insurer PT Asuransi Jiwasraya unfolded, leading to the arrest of entrepreneurs Heru Hidayat and Benny Tjokrosaputro.

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The Attorney General’s Office (AGO), which is handling the corruption case, also blocked hundreds of investors’ accounts as a part of its investigation, causing a drop in the stock transaction value by up to 40 percent.

The IDX’s main gauge, the Jakarta Composite Index (JCI), recorded an average transaction value of Rp 6.89 trillion on Monday while the market capitalization stood at Rp 5.2 quadrillion.

The JCI strengthened by 0.38 percent on Monday as foreign investors sold Rp 516.22 billion worth of stocks more than they bought, making a total net sell of Rp 18 trillion so far this year.

The bourse was also managing its expectations regarding the number of newly listed companies for this year, said assessment director I Gede Nyoman Yetna.

“We have to be realistic with the current condition and set our focus to ensure that all companies in our pipeline can list their shares this year,” he said, adding that he expected the total number of newly listed companies this year not to exceed that of 2018.

The IDX broke a new record in 2018 as 57 companies listed their shares on the bourse and made them available to be traded publicly by investors. As many as 55 companies listed their shares in 2019.

Although three companies had announced they were shelving their initial public offering (IPO) plans this year due to the high uncertainty in the global economy and financial market, Nyoman said other companies were still going forward with theirs.

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Currently, the bourse recorded 18 companies in its IPO pipeline this year with core businesses ranging from agribusiness and finance to property and trade and services.

In the meantime, 26 companies have listed their shares on the IDX since the beginning of this year, 10 of which were listed after the World Health Organization declared the COVID-19 outbreak a pandemic. Among them are hospital firm PT Metro Healthcare Indonesia (CARE), property firm PT Karya Bersama Anugerah (KBAG) and fast-food chain operator PT Cipta Selera Murni (CSMI).

Nyoman said the number of newly listed companies in Indonesia was still the highest compared to that of other bourses in Southeast Asia during the first quarter of this year, citing Ernst and Young’s Global IPO Trends report.

The JCI has lost more than 28 percent of its value so far this year amid global market volatility due to the COVID-19 outbreak, the second-worst in the region after Manila, which lost more than 30 percent, followed by Singapore (20.7 percent) and Bangkok (20 percent).

IDX president director Inarno Djajadi said the decline was not as drastic as those experienced by countries like Austria, the United Arab Emirates and Brazil, which were all down by more than 30 percent so far this year, and far better than the situation during the 2008 global financial crisis.

During that time, the JCI dropped by 50.6 percent throughout the year as foreign investors dumped Indonesian shares.

Read also: Bourse announces new trading suspension policy on brink of bear market

He attributed the current situation to a high number of domestic investors in the local bourse. Domestic investors accounted for around 60 percent of the total trading value at the bourse, IDX data showed.

“As domestic investors are now dominating our stock market, they are acting as a shock breaker when the JCI is free falling due to panic selling,” he said.

As of March 31, the Indonesian Central Securities Depository (KSEI) recorded a total of 2.68 million single investor identification (SID). Some 1.16 million were equity investors and 50 percent of the equity investors are domestic ones.