Capital Market Foundation Strengthens

Indonesia’s capital market performance in 2019, especially the stock market, stagnated compared to the previous year. However, its foundation has strengthened.

KOMPAS/ALIF ICHWAN

Finance Minister Sri Mulyani Indrawati (third left), accompanied by Trade Minister Agus Suparmanto (fourth right) close Indonesian The Indonesian Composite Index in 2019 at the Indonesia Stock Exchange (IDX) Jakarta, Monday (30/12/2019).

JAKARTA, KOMPAS – The Indonesian Composite Index (IHSG) closed at 6,299.5 on the year’s final day of trading at the Indonesian Stock Exchange (IDX) on Monday (30/12). This was an increase of only 1.7 percent compared to the close in 2018, which was 6,194.5. Stock index performance in 2019 was far below that in 2016 and 2017, when it grew 15 and 20 percent respectively. However, it was still better than the minus 2.54 percent in 2018.

“The past year has been quite hard on the economy. In the highly volatile global economic environment, all of us need to synergize to protect our economy,” Finance Minister Sri Mulyani Indrawati said at the 2019 stock trade close at the IDX on Monday.

Attending the event were Trade Minister Agus Suparmanto, Financial Services Authority (OJK) board of commissioners’ deputy chair Nurhaida and IDX president director Inarno Djajadi.

Nurhaida said that, despite the difficult challenges this year, the capital market foundation continued to strengthen and hopefully would pave the way for better performance in 2020. “This year’s performance can serve as a positive catalyst for 2020,” she said.

KOMPAS/ALIF ICHWAN

Stock trading on the Indonesia Stock Exchange was officially closed by Finance Minister Sri Mulyani Indrawati, accompanied by Trade Minister Agus Suparmanto, at the Indonesia Stock Exchange, Jakarta, Monday (30/12/2019).

Among the indicators of stronger capital market foundation was the skyrocketing number of investors throughout 2019. At the end of the year, there were 2.48 million investors in Indonesia, a 53 percent jump compared to 1.62 million investors in 2018.

The achievement is highly positive, considering that a majority of investors in Indonesia are young people.

Data from PT Kustodian Sentral Efek Indonesia (KSEI) as of late December 2019 showed that 44.62 percent of investors were aged below 30 while 24.44 percent were 31-40 years old. Therefore, people below 40 years old accounted for around 69 percent of the total number of investors.

KSEI president director Uriep Budhi Prasetyo said that more than two thirds of capital market investors were millennials. “We will prepare infrastructure to support investment growth from this age group. We will accommodate demand from millennials who wish for a quick, efficient and transparent investment process,” he said.

Institute for Development of Economics and Finance (Indef) researcher Bhima Yudhistira said the mushrooming of young investors was a result of higher awareness of the importance of investing from an early age. “Consequently, they are interested in taking the plunge into the capital market, including by buying domestic stocks,” he said.

KOMPAS/ALIF ICHWAN

Indonesia Stock Exchange president director Inarno Djajadi delivers a speech at the closing ceremony of the Indonesian capital market trade. Later, Finance Minister Sri Mulyani Indrawati, accompanied by Trade Minister Agus Suparmanto, formally closed the capital market trade in 2019.

Stable

Nurhaida said the strong capital market foundation was a reflection of Indonesia’s stable economy that boosted investors’ confidence to invest in the country. Amid global economic turmoil, foreign investors booked a total net buy of Rp 49.19 trillion (US$3.52 billion) in the capital market in 2019.

Statistics Indonesia (BPS) data showed that national economic growth in the third quarter of 2019 was 5.02 percent year-on-year. Meanwhile, national inflation or consumption price index rose 2.37 percent in January-November 2019.

Sri Mulyani said Indonesia had enjoyed good stock market credibility that could attract investors. “The capital market will keep growing if the regulator and self-regulatory organizations’ reputation and credibility get better, especially in terms of protecting smallholder investors,” she said.

The capital market will keep growing if the regulator and self-regulatory organizations’ reputation and credibility get better.

According to Sri Mulyani, the credibility and reputation of Indonesia’s capital market should be protected to attract companies to join the stock exchange. As regulator, the Finance Ministry issues a number of fiscal policies that boost the capital market, including incentives for companies that go public and incentives for income tax dividends.

Throughout 2019, 55 new companies joined the stock market. Currently, the number of companies in the capital market is 668.

Inarno said more new companies joined the IDX in 2019 than any other stock exchange in Southeast Asia, above Thailand (30 companies), Malaysia (29), Singapore (11) and the Philippines (4).

Daily transactions in the capital market reached Rp 9.1 trillion in 2019, higher than Rp 8.5 trillion in the previous year. Daily transaction frequency also increased from 387,000 in 2018 to 469,000 in 2019.