Indonesia’s stock market needed just two days of chaos to highlight what investors have long lamented: parts of the market are not trading freely.
Last week’s worst tumble in nearly three decades drew attention to a major problem at the heart of Southeast Asia’s biggest equity market: a handful of billionaires own so much of their listed companies that barely any of those companies’ shares are left to trade.
At least three billionaires directly control 85 per cent or more of three listed companies, based on recent filings. Southeast Asia’s richest person has a more than two-thirds indirect stake in Barito Renewables Energy, Indonesia’s largest listed firm. And about seven billionaires own more than 50 per cent of shares in at least 13 companies.
That concentration is now colliding with regulatory reform. Indonesia’s market watchdog said newly listing firms will be required to double their minimum free float – the number of shares available for public trading – to 15 per cent. Companies already trading will have to follow eventually too.
The regulator is responding to index compiler MSCI’s concerns about the investability of Indonesia’s US$870 billion market.
The recent MSCI statement gave the market “a bloody nose”, said Hasnain Malik, head of emerging-markets equity and geopolitics strategy at Tellimer in Dubai. The announcement “highlighted investor concerns on low free float, opaque shareholding structures, and scope for share price manipulation by related parties”.
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