The Indonesia Stock Exchange released draft regulations on Wednesday stipulating minimum free float requirements for new share listings, as it looks to move quickly to address concerns raised by index MSCI, which triggered an $80-billion market selloff last week.
Indonesia promised capital market governance reforms after MSCI warned that the $1.4 trillion G20 economy could face a downgrade from “emerging” to “frontier” market status as a result of transparency problems in ownership and trading.
“The target for the publication of the regulation is March 2026,” said Hasan Fawzi, interim chief supervisor of capital markets at OJK, Indonesia’s financial regulator.
Under the draft proposals, at the time of its initial offering, a company with pre-listing market capitalisation of more than 50 trillion rupiah ($2.98 billion) must have a minimum free float of 15% of total shares, up from the previous 10%.
Companies with a smaller capitalisation will be required to set an even higher minimum free float.
The draft also stipulated that the minimum free float level must be maintained for at least a year after listing. If the free float amount is diluted due to certain transactions, the company must restore it to the required level within two years.
The IDX has yet to publish draft rules to revise the free float requirements of companies that are already listed. Authorities have previously said they will also double the minimum continuous free float to 15%.
Local media reported that those already listed companies will be given three years to make the transition.
Based on IDX data as of September, more than 300 listed companies will have to offer shares to meet the new requirements. The value of the new shares could amount to 203 trillion rupiah ($12.11 billion).
The draft regulations will be open for feedback from industry stakeholders and the public for the next 10 days, Hasan said.
“OJK are committed to move quickly to review and provide suggestions and guidance for revisions before we implement the proposed regulation,” he said.
The Jakarta Composite Index plunged by as much as 16.7% over just two days last week, after the MSCI warning triggered a wave of capital flight from investors, who have been cooling on Southeast Asia’s largest economy.
The index posted 0.3% gain on Wednesday.
($1 = 16,765 rupiah)
Reuters
