Interview: Inarno Djajadi
How would you rate the fundraising performance of Indonesian capital markets in 2019?
INARNO DJAJADI: The IDX launched several successful initiatives in 2019, which included the initial listing of the infrastructure investment fund on April 15. New securities were also listed, including 55 stocks, 14 exchange-traded funds, two asset-backed securities, two new corporate bonds and two real estate investment trusts. Overall, Indonesia achieved the highest number of initial public offerings (IPOs) among ASEAN countries in 2019.
The IDX also successfully launched an acceleration board in August 2019 to support listed small and medium-sized enterprises (SMEs) or issuers with medium-scale assets. As of early 2020, one listed company was traded on the board. We are feeling optimistic about bringing more listed companies into our capital markets in 2020 thanks to the implementation of the e-IPO and e-Registration systems.
To what extent can the IDX assist Indonesia in achieving its Sustainable Development Goals?
DJAJADI: The IDX’s priority is to promote sustainable financing development for its 673 listed companies. For example, we will increase awareness of sukuk (Islamic bonds) issuance and assist green bonds to raise funds in the capital markets. Additionally, the IDX will develop the environmental, social and governance index to ensure the market benefits from a sustainable index and a variety of products. IDX also has a responsibility towards financial education, which is why we organise events on the importance of sustainable financial reporting structures.
How will the development of new products influence daily trading volumes on the IDX?
DJAJADI: In December 2019 IDX trade velocity stood at around 16.5%, far below that of the Stock Exchange of Thailand and the Singapore Exchange, whose trade velocity stood at over 51% and 30%, respectively. In 2019 average daily trading volume for sovereign debt reached Rp28trn ($2bn), about three times the amount of equity. However, there are virtually no instruments for hedging the risk of these debt portfolios. By providing much-needed products on the market, especially for institutional investors, we hope to increase its underlying liquidity.
What is the role of the IDX incubator in the start-up ecosystem, and what is the appetite for IPO acceleration among Indonesian start-ups?
DJAJADI: There is a promising market in Indonesia for start-ups to tap into, due to the country’s large, relatively young demographic, and the scope to increase both the state of technological development and the penetration rate. The Financial Services Authority aims to create more investment channels through equity crowdfunding, as well as a regulation to facilitate the entry of SMEs into capital markets. We hope to take the lead in supporting Indonesian start-ups by easing access to funding for SMEs.
We do not expect companies in the IDX incubator to immediately become listed on the IDX. We will let nature take its course and allow multiple financing seeds to be sown by private equity. In addition, despite their promise of high growth, many of these firms are burning money at present and profit is only expected after the first five years.
The IDX acceleration board provides an alternative for listing start-ups. The fundraising requirement is at least Rp50bn ($3.5m) but no more than Rp250bn ($17.6m). In January 2020 the start-up PT Tourindo Guide Indonesia was listed on this board, demonstrating the appetite of start-ups to use capital markets as an alternative source of funding. Following this latest listing, venture capital firms and start-up associations have started showing an interest in using the acceleration board as a funding option.
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