Domestic Stock Market Fundamentals Strengthened

KOMPAS/Lasti Kurnia

Pekerja melintas di depan Papan informasi Indeks Harga Saham Gabungan ( IHSG) di Bursa Efek Jakarta, Senin (2/3/2020). Pasca pengumuman pemerintah bahwa dua warga di Indonesia positif terkena virus COVID-19, IHSG jatuh ke level 5.361 pada penutupan perdagangan Senin (2/3), melemah 1,68 persen dibanding penutupan pekan lalu.

KOMPAS/LASTI KURNIA

A man is silhouetted against a monitor showing the Jakarta Composite Index (JCI) on Monday (2/3/2020) at the Jakarta Stock Exchange in South Jakarta. The JCI fell to 5,361 at the close of trade on Monday (2/3), weakening 1.68 percent from last week\'s close following the government\'s announcement of the first confirmed cases of COVID-19 infection in the country.

JAKARTA, KOMPAS — The government and financial regulators are working to strengthen the fundamentals of the domestic capital and financial markets. The condition of the market, which has been quite volatile lately in the midst of the rising global risks, has begun to improve. The government’s initiatives are needed amid uncertainties in the global economy due to various risk factors. The latest risk factors are the COVID-19 outbreak and the crude oil price war.

The Indonesia Stock Exchange (IDX) changed on Tuesday the auto rejection limit of stock trading. Meanwhile, the Financial Services Authority (OJK) issued a new regulation on a share buyback.

Following the issuance of the new regulation, the government asked 12 state-owned enterprises listed on the IDX to buy shares already been owned by the public.

The initiatives made by the OJK and IDX were able to effectively keep the Jakarta Composite Index (JCI) in the green zone on Tuesday, during which the Jakarta Price Index (JCI) rose 1.6 percent to 5,220.82. On Monday, the JCI lost 6.57 percent as crude oil prices in the world plunged.

Under the new auto rejection limit, the IDX will automatically suspend the trading of stocks with a price of above Rp 5,000 if shares rise more than 20 percent or fall more than 10 percent in a single trading day.

Meanwhile for shares with a price of between Rp 200 and Rp 5,000 per share, the trading will be automatically suspended if the prices rise above 25 percent or fall more than 10 percent. As for shares with a price of between Rp 50 and Rp 200, the trading will be suspended if the price increases more than 35 percent or drops more than 10 percent.

Share buyback

The president director of PT Danareksa Investment Management, Marsangap Parlindungan Tamba, said the IDX\'s move was needed to prevent the JCI from falling further. Since the beginning of this year until Tuesday, the JCI had dropped by 7.12 percent. "The market needs a shield to prevent prices from falling deeper because stock prices are no longer in line with their price-to-book value ratio," he said.

If there is no more global pressure, generally publicly listed companies are willing to buy back to maintain the value of their shares.

However, Marsangap said that more policies were still needed to restore investors’ confidence to re-enter the stock market. He supported the share buyback policy. "If there is no more global pressure, generally publicly listed companies are willing to buy back to maintain the value of their shares. The stock price is like a signal that reflects the value of the company,” he added.

Meanwhile, SOEs minister special staff member Arya Sinulingga said publicly listed SOEs would buy back their shares to respond to the sluggish market condition. The value of the shares to be repurchased is estimated to reach between Rp 7 trillion and Rp 8 trillion.

"We need to improve the market confidence. The share buyback is only a temporary measure. The shares would be gradually released again when the condition improves," said Arya.

State-owned companies in the banking sector that will buy back their shares are Bank Rakyat Indonesia Tbk, Bank Negara Indonesia Tbk, Bank Mandiri Tbk, and Bank Tabungan Negara Tbk, while those in the infrastructure sector are PT Wijaya Karya Tbk, PT Waskita Karya Tbk, PT Jasa Marga Tbk, PT PP Tbk and

PT Adhi Karya Tbk. State-owned companies in the mining sector PT Aneka Tambang Tbk, PT Timah Tbk, and PT Bukit Asam Tbk will also buy back their shares.

“The buyback plan will be decided by each SOE. We ask them to carry this out immediately. The price index has lost up to 7 percent," said Arya.

We are still assessing the time and amount.

The president director of PT Bukit Asam Tbk, Arviyan Arifin, confirmed that the buykack policy had become of the company\'s programs. "We are still assessing the time and amount," Arviyan said in Jakarta on Tuesday.

As of Feb. 29, 2020, Asahan Aluminum (Persero) owns 65.93 percent of Bukit while the public has 31.2 percent of shares. The remaining 2.87 percent comprise the company’s treasury stocks. (DIM/APO/AGE)