Arya News - The IDX, along with the OJK, has announced a new policy to double the minimum free float requirement to 15 percent from 7.5 percent at present, using a case-by-case approach in addition to assistance for listed firms for gradual implementation by March.
JAKARTA – Listed companies are expected to release more than Rp 187 trillion (US$11 billion) in new shares as the Indonesia Stock Exchange (IDX), along with the Financial Services Authority (OJK), seeks to double the percentage of shares available for public trading as part of a wider push to reform the capital market.
Authorities aim to increase the minimum free float requirement from currently 7.5 percent to 15 percent.
The move comes as a response to a warning issued late last month by global index provider MSCI, which raised concerns over transparency and price manipulation on the Indonesian bourse and threatened to downgrade its status from emerging to frontier market.
To meet the new minimum free float requirement, around 267 companies would need to increase the amount of their listed shares, potentially unleashing a significant increase in publicly distributed shares, IDX assessment director I Gede Nyoman Yetna said in a statement on Thursday.
Several big companies on the IDX have a free float below the new requirement including tycoon Prajogo Pangestu’s Barito Renewables Energy, which is currently Indonesia’s top stock based on market capitalization but has a free float of 12.3 percent.
State-owned lender Bank Syariah Indonesia will also need to boost its free float from 9.2 percent at present, according to IDX data.
Authorities have announced on multiple occasions that the free float hike will be implemented gradually alongside continuous assistance for listed firms toward a targeted implementation date in March.
The OJK said on Friday that it would publish a “special notation” for investors indicating which stocks were yet to fulfill the new requirement.
“This will make it easier for investors select the stocks they plan to invest in, providing them the necessary information on which stocks have or have not met the 15 percent free float requirement,” acting OJK chairperson Friderica Widyasari Dewi told a press conference on Feb. 20.
At the same event, acting OJK executive head Hasan Fawzi said the authority was preparing an exit policy for firms that failed to meet the requirement. He noted that those failing to fulfill the 7.5 percent rate would be the first to be suspended, adding that such companies faced the risk of being delisted if they showed no subsequent improvement.
As of Jan. 29, the IDX has temporarily suspended 38 issuers that failed to meet the 7.5 percent free float minimum.
Hasan also said authorities would “give space for certain issuers” that were facing challenges such as low market absorption, and that a case-by-case approach would be employed in implementing the new policy.
IDX president director Jeffrey Hendrik said the free float hike, which is part of the broader measures proposed to MSCI, was in line with authorities’ plan to improve the integrity of Indonesia’s capital market by the end of April.
The plan contains eight actions in four clusters: a new free float policy, improved transparency, stronger governance and enforcement as well as stakeholder synergy. It also includes an initiative for the bourse to go public through demutualization, for which the government is currently drafting a regulation.