Indonesia Speeding Up Reforms To Restore Investor Confidence After Stock Market Slump

Indonesian policymakers are accelerating market reforms to restore investor confidence after a two-day plunge in stocks led to the resignations of Indonesia Stock Exchange Chief Executive Iman Rachman and Financial Services Authority Chairman Mahendra Siregar.

The benchmark Jakarta Composite Index plunged more than 10% on Wednesday and Thursday, the worst selloff since the Asian financial crisis, after Morgan Stanley Capital International warned that Indonesian stocks could be downgraded unless regulators move to expand ownership of local companies. Stocks pared some losses on Friday after the government pledged to speed up reforms.

The government said it would double free float requirements for listed companies to 15%, increase ownership transparency and increase stock market investment limits for insurance companies and pension funds from 8% to 20% to help support the market.

“The government reaffirms its commitment to safeguarding the stability and credibility of Indonesia’s capital markets through a series of strategic and prudent steps,” Coordinating Minister for Economic Affairs Airlangga Hartarto said in a statement. statement.

The government is accelerating reforms as capital markets come under increasing scrutiny. Last year, investor confidence was hit by the sudden resignation of Finance Minister Sri Mulyani Indrawati as the fiscal deficit widened.

“The government urges market participants to remain calm and view the situation as an impetus to adjust the market towards healthier conditions,” Airlanga said.

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