Indonesia to cut 300 more tightly held stocks from benchmark

INDONESIA’S bourse will classify an additional 300 stocks to its high shareholder concentration list, leaving a third of its index members ineligible to stay in its benchmark, as it seeks to boost market transparency. 

The exchange will remove the market-cap prerequisite for inclusion on the list, previously set at 5 trillion rupiah (US$277 million), and introduce new qualifying criteria. These include stocks where 10 or fewer holders own at least 92.5 per cent of shares. The bourse will also drop the so-called price impact ratio, which measures the magnitude of a share move relative to its trading activity, as a determining factor.

The announcement, made by Indonesia Stock Exchange chief executive Jeffrey Hendrik late Tuesday, is the latest step by regulators and officials to stave off a double downgrade by MSCI, after the index compiler warned last month about concerns over opaque shareholding structures and coordinated trading.

The additional 300 stocks, representing about 6.16 per cent of the Jakarta Composite Index’s market cap, will add to the 83 existing companies on the list. Firms that are on the list will be removed from both the MSCI and JCI indexes. To exit the list, firms and shareholders have to sell stock to the public via transactions in the regular market. 

In a note after the announcement, Citigroup analysts including Ferry Wong said that recent actions by authorities are decent, “but more efforts are likely needed to avoid downgrade.” 

Authorities have also imposed fines on manipulative market practices and pledged strong enforcement in recent weeks. It comes at an additionally urgent time, given the months-long foreign investor exodus and the benchmark gauge tumbling more than 40 per cent so far this year to become the world’s worst-performing stock market.

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The JCI was down 0.2 per cent on Wednesday. BLOOMBERG