Indonesia Stock Exchange Announces 2017 Targets
The Indonesia Stock Exchange (IDX) targets to see a total of 35 initial public offerings (IPOs) in 2017. To achieve this target the IDX will raise efforts to encourage Indonesian companies to go public. Besides these IPOs, the IDX also targets to see 60 companies to conduct a rights issue next year. These targets were announced by IDX Director Tito Sulistio after the extraordinary general meeting on Thursday (20/10). So far in 2016, only 12 companies went public in Indonesia. This poor score is the result of high uncertainty on the global financial markets.
After 2013 the number of IPOs in Indonesia has been declining, particularly as companies are concerned about markets' reaction to looming (further) monetary tightening in the USA and the economic slowdown of China, the world's second-largest economy.
IDX Director Sulistio informed that the IDX targets five types of companies to list in Indonesia in the foreseeable future:
- Foreign companies; Sulistio said several Singaporean companies have expressed their interest to move to Indonesia as their liquidity in Singapore is not satisfactory
- Foreign companies that generate 50 percent of their earnings in Indonesia but are currently listed abroad. There are 52 companies selected by the IDX that fall in this category
- State-owned enterprises (and their subsidiaries); state owned firms play a big role in the Indonesian economy but relatively few are listed. By simplifying procedures to list on the IDX, they might become more eager to go public. Sulistio said there are 14 units of state-owned enterprises expected to list on the IDX in 2017
- Companies that obtained more than IDR 1 trillion (approx. USD $77 million) in loans from banks. Sulistio explained that when companies borrow from banks they basically borrow from the people who place their funds at banks' deposit and saving accounts. Considering it involves people's money, companies should become more transparent. An IPO would enhance transparency and corporate performance, and
- Those foreign companies that have been operating in Indonesia for more than five years. Sulistio would like to see at least 20 percent of their shares fall into Indonesian hands.
In 2017 the IDX also targets to see 60 listed companies conducting a rights issue in Indonesia. Amid the improving economy - Indonesia's gross domestic product (GDP) is expected to expand by 5.3 percent (y/y) in 2017, up from an expected 5.0 percent in 2016 - investor appetite for rights issues should increase accordingly.
Meanwhile, average daily transaction value in 2017 is projected to rise to IDR 8 trillion (approx. USD $615 million) from an estimated IDR 6.6 trillion in 2016 on the back of new initiatives, including securities financing.
The IDX also announced it develops the Morgan Stanley Composite Index Indonesia (MSCI Indonesia) for derivatives.
Number of Initial Public Offerings (IPOs) in Indonesia:
| Year | Number of IPOs |
| 2008 | 12 |
| 2009 | 13 |
| 2010 | 23 |
| 2011 | 25 |
| 2012 | 22 |
| 2013 | 30 |
| 2014 | 23 |
| 2015 | 15 |
| 2016 | 12¹ |
¹ up to 20 October
Source: IDX
Advantages for a company to go public:
- Generate fresh funds that can be used for business expansion or to pay off debt
- Raise public awareness of the company/adding a new group of potential customers
- Increase the company's market share
- Lucrative exit strategy for founding individuals
- Improved management due to mandatory higher degree of financial and corporate transparency to the public
Disadvantages for a company to go public:
- Higher costs of complying with regulatory requirements
- Adjust to a higher degree of financial and corporate transparency
- "Market pressure" causes companies to focus on short-term instead of long-term growth
Number of IPOs in Regional Perspective:
| Country | Number of Listed Companies |
| Indonesia | 537 |
| Singapore | 716 |
| Thailand | 713 |
| China | 2,964 |
| Malaysia | 809 |
| Japan | 3,531 |
| South Korea | 739 |
| USA | 6,065 |
Source: Investor Daily