Taking Stock, Indonesian Bourse Director Sees Vigorous Growth on the Horizon

Despite the roller-coaster ride in capital markets worldwide, more and more people are looking to get a piece of Indonesia’s impressive growth through stocks and bonds. From huge institutional investors at home and abroad to local players with small portfolios, the Indonesia Stock Exchange is a choice playing field.

The national bourse, also known as the IDX, is looking to lure investors by creating new products and encouraging more companies to list shares and issue bonds, as well as making the market more accessible by offering online trading. The exchange is also intensifying efforts to educate the public about the benefits of investing in capital markets.

Frederica Widyasari Dewi, IDX’s director for capital market development who took over in July last July, sat down recently with the Jakarta Globe and told of her plans to increase the number of investors on the bourse to 2.3 million by 2012 from just 380,000 now, as well as doubling the amount of funds invested over the same period.

How are you seeking to expand the nation’s capital markets?

As the director responsible for market development, I have three main programs: increasing the number of investors, raising the number of issuers and creating new products. We are aiming for the number of investors to reach 2.3 million by the end of 2012, or 1 percent of the country’s population. We also are aiming to double the market size from Rp 1,560 trillion to Rp 3,000 trillion [$168.48 billion to $324 billion]. On the product side, we will soon launch structured warrants [a stock option based on a basket of companies’ shares or an index] after we add stock-option contracts and asset-backed securities. We will create market-driven products, not the regulator-driven securities of the past.

How are you going to raise the number of investors?

The stock exchange and the regulator will implement a program that allows online investors to trade stocks and make settlements [without going through brokerages].

Is online trading opening the door to more investors?

Our market is truly developing now. I can share an amazing story from a local securities firm. Only one year after adding online trading, its number of clients jumped to 14,000, compared with the 1,400 clients it had before implementing online trading. A year after that, the number of clients was 46,000.

Where are most of the nation’s investors based?

Most investors come from big cities such as Jakarta, Surabaya, Semarang, Bandung, Medan and Makassar. Up-and-coming companies that are going public come from regions with high economic growth, such as Central Java and East Java.

What challenges you are facing in developing the market?

Many people are still questioning whether investing in capital markets is allowed by Shariah law. This is being addressed by religious authorities, and there are already 186 stocks that have been categorized as Shariah-complaint by the National Syariah Board (DSN) and Islamic Clerics Board (MUI). They also approve sukuk [Islamic bonds].

What is your program for educating people about capital markets?

In cooperation with state brokerage PT Danareksa Sekuritas, we founded capital market schools for would-be investors in 2006. This year we also plan to build the Indonesia Capital Market Institute, which aims to educate more professionals to work in securities. We have founded capital market educational centers in regional cities and at 60 universities.

How does the educational program deal with investors’ fears of having their funds stolen?

You need patience in educating people. The embezzlement of clients’ funds, such as in the Sarijaya and Antaboga cases, can happen anywhere. But in capital markets, we adopt a transparency principle to ensure fairness to investors. The stock exchange and the regulator are continuing their efforts to improve investment security. Now, investors can access information about their securities in KSEI [Indonesia Central Securities Depository]. We are preparing to set up investor protection funds [to cover securities losses due to fraud].

Are you seeing many companies from the region going public?

They have a big appetite as they need to raise funds, and not only from banks. But tax issues remain an obstacle. They must produce two separate financial reports. The first is for banks, offering a rosy picture so they can access loans, and the other goes to the tax office reporting a loss or a small profit so they won’t have to pay high taxes. This is a pity, but it happens. A company’s management told me that should their company go public and have to pay higher taxes, the company’s products would be not be as competitive. This is a challenge, but the situation will change as we reform the bureaucracy and tax systems.

What are your hopes for the nation’s capital markets?

I want more women to be involved in investing. They are the key to success in countries such as Korea, where women trade stocks online after bringing their kids to school. I want Indonesia’s woman to be able to do the same thing.

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