What Are the Most Illiquid Stocks on the Indonesia Stock Exchange?

There are a couple of reasons that explain why investors do not care for a company's shares. The corporate or financial performance of the company can be bad (with no expectations for an improvement in the future) and therefore investors believe the share price can only decline.

In case the company is actually delivering good corporate management and good financial figures, then lack of investor appetite can also be explained by the limited free float of the company (the proportion of shares of the company that is traded) on the Indonesia Stock Exchange.

In fact, due to the limited amount of free float investors may not even be aware of the listed company, nor its positive perspective. Or, when investors see there is limited to zero activity in a company's stock trading (illiquid) they can be concerned that it will be difficult to sell the shares later on. Therefore, it is advised that these companies - those that are showing good corporate management and solid financial earnings - increase their free float.

In fact, per February 2016, the Indonesia Stock Exchange ordered all listed companies to comply with the new minimum free float requirement of 7.5 percent of companies' enlarged equity (through BEI No. Kep-00001/BEI/01-2014). Through that regulation listed companies in Indonesia are also required to have at least 300 shareholders. The purpose of this regulation is to increase liquidity in the local stock market.