Indonesia to ease trading rules to lure mom-and-pop investors

[JAKARTA] Indonesia's stock exchange plans to cut the minimum trading price for shares and shrink the lot size in its drive to attract more retail investors and boost volumes.

The bourse will revise the decade-old requirement for stocks to maintain a floor price of 50 rupiah and lower the minimum order size from 100, Laksono Widodo, director of trading and membership at PT Bursa Efek Indonesia, said in an interview.

The Jakarta Composite Index has rebounded from 2018's selloff to trade near its all-time high reached last February, as foreigners have turned bullish on Indonesian equities after being net sellers in the past two years. That's as volume and turnover have climbed since the settlement period for stocks was cut to two days from three in November. The bourse is eager to maintain the momentum, Widodo said.

"It's all about the development of the retail market and deepening of financial markets," he said. "We need to revise various rules on trading, and hopefully it all can come in the second half of the year."

Twenty six of the 637 stocks in the benchmark Jakarta Composite Index stopped trading after their prices fell to 50 rupiah each. Revising the floor price will allow these shares to change hands again at prices that will reflect their fundamentals, he said.

Reducing the lot size will bring high-value shares like PT Gudang Garam with the reach of retail investors. A single transaction in the stock under the existing norms cost 8.3 million rupiah (S$797). That's more than twice the minimum monthly wage in Jakarta.

Also on the cards is easing of rules for companies planning first-time share sales after a record number of IPOs last year, Mr Laksono said.

Volumes on Indonesia's US$523 billion stock market have climbed 23 per cent on average in the months after the settlement cycle was pruned in November from the mean 12 months prior, data compiled by Bloomberg show. Daily turnover jumped at least 17 per cent in the period and has stayed above the exchange's 9 trillion rupiah target.

"The exchange has provided a good boost to the market," said Taye Shim, head of equities capital market at PT Mirae Asset Sekuritas Indonesia, said. "We expect a further increase in retail participation if the reduction in minimum transaction price and lot size were to materialise."

BLOOMBERG