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Jakarta Post

OJK slashes 2020 equity fundraising target by 47%, still optimistic for 2021

  • Riska Rahman

    The Jakarta Post

Jakarta   /   Wed, November 4, 2020   /   08:15 am
OJK slashes 2020 equity fundraising target by 47%, still optimistic for 2021 A woman wearing a face mask walks past an electronic display board showing stock movement on Sept. 10, 2020 at the Indonesia Stock Exchange (IDX) in Jakarta. (JP/Seto Wardhana)

Indonesia’s Financial Services Authority (OJK) has lowered its capital market fundraising estimate for this year to Rp 100 trillion (US$6.84 billion), as some issuers are delaying their fundraising plans amid the global rout triggered by the COVID-19 pandemic.

The revised figure is 47 percent lower than the authority’s initial estimate of Rp 190 trillion and almost 40 percent lower than the Rp 166 trillion realized in 2019.

“Like it or not, we have to adjust the target during this pandemic,” Hoesen, the OJK’s chief executive of capital market supervision, said during a virtual press briefing on Monday.

The Jakarta Composite Index (JCI), the main gauge of the Indonesia Stock Exchange (IDX), has shed more than 18 percent of its value this year to date, with a heavy loss in March when the index crashed to 3,937, its lowest level in more than five years. 

The local bourse recorded a foreign net sell of Rp 48.07 trillion on Tuesday as foreign investors dumped risky assets due to pandemic fears, while the JCI recouped 0.87 percent on Tuesday to end the day’s trading session at 5,159.45.

Although the OJK has recorded a total of Rp 93.39 trillion in funds raised from 141 initial public offerings (IPOs) and debt paper issuances as of Oct. 26, several companies have decided to postpone their fundraising plans.

The Indonesia Securities Pricing Corporation (PHEI) said in May that the company had revised down its issuance forecast for this year from an initial Rp 170 trillion to between Rp 100 trillion and Rp 110 trillion, citing growing uncertainties as a result of the pandemic.

Privately owned airline Lion Air also deferred its $500 million planned IPO earlier this year due to the sharp fall in global stock markets, Reuters reported in February.

Read also: Despite pandemic, Indonesian companies pursue IPOs

Hoesen remained optimistic, however, that capital market fundraising would generate Rp 130 trillion to Rp 160 trillion in 2021.

“We expect the real sector’s funding needs to bounce back, as they need to expand their businesses next year,” he said.

The Indonesian economy contracted 5.32 percent in the second quarter on the back of shrinking consumption and investments amid the pandemic, but the government expects the economy to rebound toward growth next year.

The coronavirus crisis has disrupted business activities and sapped demand, and the country’s banks have continued to struggle to disburse more loans. OJK data show that bank loans grew just 0.12 percent in September in a further slump from 1.04 percent in August, as consumption loans and working capital loans contracted 1.35 percent and 2.78 percent, respectively.

“The decline in working capital loans is understandable, as many big debtors, including corporations, have seen a decline in operational volume during the pandemic,” OJK chairman Wimboh Santoso said. He added that the demand for working capital loans would return to normal once the economy recovered.

Meanwhile, Indonesia’s gross nonperforming loan (NPL) ratio stood at 3.15 percent in September, slightly lower than the ratio of 3.22 percent recorded in August.

Wimboh expressed optimism that the banking industry’s problem loan ratio would remain below the 5 percent threshold, following the extension of the OJK’s loan restructuring program.

The OJK announced late last month that it was extending its loan restructuring program by another year to March 2022, to provide support to banks as well as debtors against the declining quality of borrowers during the economic downturn.

“Banks have run self-assessments of their assets. So if they think that a debtor will not survive, they have set aside provisions to mitigate the possibility,” OJK chief executive of banking supervision Heru Kristiyana said during Monday’s briefing.

Big banks, including privately owned Bank Central Asia (BCA) and state-owned Bank Negara Indonesia (BNI), reported profit declines in the first nine months of the year due to higher loan loss provisioning.

BCA recorded a 4.2 percent year-on-year (yoy) decline in profit to Rp 20.04 trillion in September, when the bank’s provisioning skyrocketed 160.6 percent to Rp 9.13 trillion.

Meanwhile, BNI recorded a 64 percent yoy slump in profit to Rp 4.32 trillion in September. BNI consumer business director Corina Layla Karnalies cited conservative provisioning measures for the sharp fall in its bottom line over the first nine months of the year.