Indonesia sees US$11 billion in share sales for free-float aim
Indonesian authorities have pledged to satisfy MSCI’s concerns by March
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[JAKARTA] Indonesia is bracing for share sales of around US$11 billion to meet tougher free-float rules aimed at heading off a potential downgrade to frontier market status by MSCI.
The Indonesia Stock Exchange estimates that 267 companies will need to lift their public shareholdings to 15 per cent, up from the current 7.5 per cent minimum, implying share sales worth about 187 trillion rupiah (S$14 billion), according to listing director I Gede Nyoman Yetna.
The push follows MSCI’s warning last month that Indonesia might be downgraded to frontier-market status over concerns about investability and limited free float, a move that triggered the worst market rout in nearly three decades. Regulators are now scrambling to restore credibility, boost liquidity and reassure global investors that the market remains accessible.
Indonesian authorities have pledged to satisfy MSCI’s concerns by March. Along with the higher free-float requirement, steps include tightening the disclosure threshold for significant shareholdings to 1 per cent from 5 per cent, and buying by sovereign wealth fund Danantara. The country has also seen leadership changes at its exchange and regulatory bodies.
“Indonesia has enough investors, local and foreigner, to absorb these share sales from companies and controlling families,” said Nirgunan Tiruchelvam, an analyst at Aletheia Capital. “It will help in meeting MSCI’s demands to an extent.”
Meanwhile, initial public offerings will also have to meet a higher bar for free float at 15 to 25 per cent, depending on the company’s market capitalisation. That compares with the current requirement of 10 to 20 per cent, depending on equity position.
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No company has gone public in the nation so far this year. Indonesian listings raised US$1.1 billion last year, according to data compiled by Bloomberg. BLOOMBERG
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