Indonesia Stock Market Update: IPOs and Free Float Regulation
There are seven companies that are expected to conduct an initial public offering (IPO) on the Indonesia Stock Exchange (IDX) in the first quarter of 2016: Buyung Poetra Sembada, Summarecon Investment Property, Mahaka Radio Integra, Cikarang Listrindo, Mitra Pemuda, Ciputra Residence, and Bank Ganesha. In total, the IDX targets to see 35 new listing on the IDX in 2016. Indonesian lender Bank Artos Indonesia was the first company to be added to the IDX in 2016.
The year 2016 should be a better year for companies to list their shares on the IDX as the December US interest rate hike removed some uncertainty from the markets, while Indonesia's economy is expected to accelerate again (after five years of economic slowdown). However, concerns remain due to China's hard landing and persistently falling crude oil prices.
Lucky Bayu Purnomo, analyst at LBP Enterprise, said the property sector might be the most attractive sector now for companies that want to conduct on IPO on the IDX as investor interest in shares of property developers is still relatively strong, especially now Bank Indonesia decided to cut its benchmark interest rate by 25 basis points to 7.25 percent at its January 2016 policy meeting. As such, Purnomo believes that the IPOs of Summarecon Investment Property and Ciputra Residence will be the most popular IPOs in the first quarter (if these companies indeed go-ahead with the IPO).
Further Reading: View all Listed Companies on the Indonesia Stock Exchange
The IPO of Mahaka Radio Integra, on the other hand, is not believed to be much sought-after by investors as the media industry is being dominated by television and Internet. There seems few interest for the radio sector.
Mandatory Free Float Regulation Starts from 31 January 2016
With only a few days left, there are still six Indonesian companies listed on the IDX that are yet to comply with the new minimum free float regulation. This rule, which was announced in January 2014, states that - starting from 31 January 2016 - all listed companies on the IDX are required to have a minimum free float of 7.5 percent. Tito Sulistio, General Director of the IDX, said he will soon meet with these companies and there may be a possibility that these six companies will be granted more time to adjust their free float ratio. In case they are reluctant to comply with the new rule, then these companies could face a (temporary) suspension from trading. Sulistio was reluctant to name the six involved companies.
The minimum free float requirement of 7.5 percent of companies' enlarged equity to be released to the public is stipulated by BEI No. Kep-00001/BEI/01-2014. Listed companies are also required to have at least 300 shareholders. This new regulation aims to boost market liquidity and raise trade volume.