Indonesia’s authorities have commenced a series of initiatives aimed at improving their capital markets. Index provider FTSE Russell joined its peers in raising concerns over the investability in the domestic equity market this week, announcing that the upcoming review in March has been postponed due to the risk of adverse turnover and uncertainty in establishing the available public float. The review might take place around mid-year, subject to developments on the proposed taskforce for capital market reforms. The taskforce will be led by the securities regulator OJK alongside the Coordinating Economic Ministry, Finance Ministry, and Indonesia Stock Exchange, besides other stakeholders. A proposal had been tabled to classify investors into 28 (vs 27 earlier) sub-categories, with the public consultation period for draft free float regulation due to run till early next week. The stock exchange also initiated discussions with the FTSE to align investor disclosures with the provider’s standards. Initial bunch of measures, discussed earlier, include raising the minimum free float requirement to 15% from 7.5%, strengthening disclosure of beneficial ownership, and expanding investor and shareholding disclosures from the current 5% threshold to above 1% (link).
Onshore markets have maintained a subdued tone in the past week, with the Moody’s outlook cut (see note) pushing yields sharply higher late last week, before stabilising on Monday/ Tuesday. The state investment agency Danantara was advised to share its investment framework with the rating agency, while the government reaffirmed its policies around fiscal discipline to maintain investor confidence. We expect other near-term action to include maintaining a market-friendly narrative, efforts to strengthen inter-agency coordination, and maintain regular communication to boost policy predictability. Direct engagement with the rating agency as well as index providers to address any outlook-related concerns will also be prioritised. Separately, United States Trade Representative Greer signalled that a trade deal with Indonesia was in the works and could be finalised soon. Indonesia was among the first few to secure a framework tariff deal with the US in 3Q last year, which helped to reduce the tariff to 19% from 32%. The two countries are expected to conclude the deal and establish bilateral concessions/ exemptions as well as other nuances. USDIDR has been largely rangebound within 16600-16800, with an upmove capped by dollar swings. BI signalled there is room to lower rates further this year, which we reckon might be in the second half after onshore market and sentiments stabilise.
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