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With the largest GDP among ASEAN countries, demographic advantages, and a robust stock market, Indonesia has a promising outlook. Regulatory reforms and initiatives to develop the country’s capital markets should help investors.


The Emerging Asia Pacific Capital Markets: Indonesia

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Overview

Indonesia is one of the promising markets in Asia, as a country with the largest GDP in the Association of Southeast Asian Nations (ASEAN)—nominal GDP of USD1.12 trillion in 2019. Besides that, Indonesia has a population of 267 million, also the highest in ASEAN, with a demographic bonus. There is still much room for growth in the Indonesian capital market from both the investors’ side and the listed companies’ side.

The Indonesian government reactivated its capital market in 1977. In 2007, Surabaya Stock Exchange merged with Jakarta Stock Exchange to become the Indonesia Stock Exchange (IDX). In its development, IDX continues to reform and refine the capital market supporting systems, facilities, and infrastructure, including the development of digital technology for the advancement of the Indonesian capital market.

Equity is the main instrument in the Indonesian capital market. Over the years, the domestic stock market has grown tremendously and the regulatory environment has improved. The market capitalization increased to IDR7,265 trillion (equivalent to USD521 billion) in 2019 from IDR2,019 trillion (equivalent to USD214 billion) in 2009, and average daily trading value increased to IDR9.11 trillion (equivalent to USD653 million) per day in 2019 from IDR4.05 trillion (equivalent to USD300 million) per day in 2009. The trading figures are supported by a rising number of listed companies; the number of listed companies on IDX increased to 668 in 2019 from 398 in 2009. On average, IDX has listed 30 new companies per year, and it has an increasing trend.

Various outreach programs have been implemented to attract issuers and investors. Some of the major programs include the following:

  • Islamic capital market products and development
  • Development of another listing board, including small and medium-size companies
  • Simplification of going public and listing process
  • Minimum floating shares and shareholders’ requirements
  • Margin trading regulation easing and establishment of IDX Securities Financing
  • T+3 to T+2 settlement process
  • XBRL disclosure, integrated and bilingual disclosure
  • E-voting and e-proxy

Several initiatives are underway, such as boosting liquidity of non-equity products, more investor protections, and ESG (environment, social, and governance) investment. Products variation, such as structured warrants, futures, and exchange-traded funds, is expected to be more active in the future, complementing equity products.

This article is from "The Emerging Asia Pacific Capital Markets: Challenges and Opportunities," published by CFA Institute Research Foundation.

About the Author

Ignatius Denny Wicaksono, CFA
Ignatius Denny Wicaksono CFA, CIPM

Ignatius Denny Wicaksono, CFA, CIPM, is head of the business development division at Indonesia Stock Exchange (IDX). His main responsibility is to support IDX and Indonesia Capital Market’s initiatives to ensure a fair, orderly, and efficient capital market. Mr. Wicaksono holds an MBA from I.A.E. Grenoble, a master’s of management degree from the University of Indonesia, and a bachelor’s degree in electrical engineering from the University of Indonesia.