Stock investors have sold more stocks (that are traded on the IDX) than they have bought so far in 2018 amid global trade tensions (led by protectionism in the USA - and retaliation - in China), monetary policy normalization in the USA and European Union (EU) as well as the fragile rupiah (which is badly affected by aforementioned global turmoil and by Indonesia’s trade deficit and widening current account deficit).

This makes it particularly remarkable in our eyes that many local companies have decided to conduct an IPO in Indonesia this year. Meanwhile, economic growth in Indonesia has been rather stagnant in recent years around the 5 percent (y/y) level, which is often attributed to subdued consumer purchasing power in Southeast Asia’s largest economy, while weak global demand causes Indonesian exports to underperform. Moreover, forecasts for future economic growth in Indonesia and the world are not too optimistic. This would surely not be the ideal context to seek new funds for business expansion through an IPO.

Not only is there the threat of weak appetite for the issuer’s stocks (thus requiring the company to offer its stocks at a more attractive price during the IPO) but a sudden sell-off can also easily undermine the value of the company’s stocks. Lastly, weak domestic and global demand (which may not improve in the near future) make it not the best time to think about business expansion.

On the other hand, the fragile rupiah makes it less attractive to seek foreign-denominated loans, while rising interest rates at home (Bank Indonesia having raised its benchmark interest rate from 4.25 percent to 6.00 percent) makes it more expensive to borrow money. Meanwhile, we should also not forget that an IPO has more advantages than simply collecting new funds (although the primary objective is indeed raising capital).

The text above is the introduction to the article that is included in the November 2018 edition of our research report.

Read the full article in the November 2018 edition of our monthly research report (scheduled to be released in early December 2018). You can purchase this report by sending an email to or a WhatsApp (WA) message to the following number: +62(0)8.788.410.6944