Emerging Market – Indonesia Stock Exchange
Get to know the Indonesian Stock Exchange with 3E Accounting’s quick read of Indonesia’s only stock market.
The Indonesian Stock Exchange (IDX) or Bursa Efek Indonesia came into existence in 2007 and is located in Jakarta. The IDX is an amalgamation of the Jakarta Stock Exchange (JSX) and the Surabaya Stock Exchange (SSX). Stocks, Exchange Traded Funds (ETFs), corporate bonds, derivative instruments, Real Estate Investment Trusts (REITs), and equities can be traded via the IDX.
The IDX consists of three boards for listings:
- The Main Board: used by companies with regional listings with reference to net tangible assets, size, etc.
- The Development Board: companies with prospects but do not, as yet, qualify for the Main Board.
- The Acceleration Board: listings by SMEs (small, medium enterprises) with potential but do not qualify for the Developmental Board yet.
All public companies need approval from the IDX in order to list and trade. It is also a requirement that all listed companies must list issued and paid-up shares unless expressly provided an exemption by the IDX.
Generally seen as an emerging market, the IDX needs further strengthening via strong regulation. While pushing for transparency and safe trading, legislation and policy need to be further fine-tuned to achieve good governance.
By virtue of market capitalization, Indonesia ranks 32nd globally. Its market capitalization as of mid-2020 is approximately USD 380 billion, and slightly over a million people have invested in stocks.
In order to purchase Indonesian stocks, investors will need to open a securities account. This must be done with an IDX-approved Indonesian brokerage or securities company. The procedure is straightforward for a citizen or resident. However, foreign investors without a resident permit or KITAS may have some difficulties with compliance.
From Strength to Strength
Indonesia’s stock market has had an irregular history of trading. Initially, the JSX was set up for the Dutch East India Company in 1912. It underwent many periods of inactivity, especially during both the world wars. It finally found some semblance of stability under the Capital Market Supervisory Agency (Badan Pengawas Pasar Modal or Bapepam).
From there, it grew slowly in strength and stability as new laws and regulations were implemented. The year 1990 saw a significant ‘bull-run’ and led to the JSX’ privatization in 1992 under the Jakarta Exchange Inc. Trading activity improved, especially with the introduction of automatic and remote trading. It finally led to the eventual merger with the SSX and the creation of a data centre in 2018.
By the end of 2019, the IDX had ASEAN’s (the Association of Southeast Asian Nations) largest company listings with 668 listed companies. Government bonds had increased by 37.8%, while corporate bonds rose by 18.6%. There was a 53% rise in the number of investors and a significant improvement in overall liquidity.
Overall, the Indonesian Stock Exchange’s more robust listings, a growing number of investors, and market liquidity all point to sustainable growth.