Indonesia plans 25% free-float level to deepen market, OJK says

[JAKARTA] Indonesia plans to gradually increase the minimum free-float level for listed companies as part of its effort to deepen stock market liquidity and attract more investors.

The free-float requirement will rise in various stages – first to 10 per cent, then 15 per cent, before reaching 25 per cent, according to Inarno Djajadi, head of capital market supervision at the Financial Services Authority (OJK).

He did not provide a timeline for the changes, which are related to the number of shares available for public trading.

“We are studying this very seriously and we hope to be able to implement it in the near future,” Djajadi said during a press conference on Nov 15. The current free-float minimum ranges from 7.5 to 10 per cent.

For years, liquidity challenges have fuelled debate among investors given that Indonesia, South-east Asia’s biggest market, has the region’s highest share of low free-float companies in its benchmark.

Those concerns heated up last month after MSCI asked for feedback on its calculation of public float, a move that analysts warn could trigger outflows if the methodology changes.

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Meanwhile, the Indonesia Stock Exchange has also proposed the regulator calculate free float levels based on a company’s market value rather than its equity position, which would better capture market moves, president director Iman Rachman said at the same briefing.

“We have also proposed easing requirements for rights issues to encourage an increase in free float levels,” he added.