(Dec 3): Indonesia plans to set a minimum free float of 20% for companies seeking listing with a market capitalisation below five trillion rupiah (US$301 million or $390 million) in an effort to curb price volatility.
The Financial Services Authority, known as OJK, will set lower free float thresholds for companies with a higher market value, said Inarno Djajadi, head of capital market supervision, at a parliament hearing in Jakarta on Wednesday. This would raise the free float requirement from the current level of 20% for companies with equity value below 500 billion rupiah during the initial public offering, he said.
Newly listed companies will likely be required to maintain the free float levels for one year after listing, he said.
Indonesian regulators have been working to improve transactions and deepen the local market as liquidity and price volatility issues loom around Southeast Asia’s largest exchange. The OJK plans to gradually increase listed companies’ continuous free float level — the amount of shares available for public trading in the open market — to a minimum of 10% to 15% from the current 7.5%, Djajadi said.
The levels will be reviewed regularly to ascertain if a higher requirement is needed, he added. He did not specify the exact timeline to implement the new rules.
Last month, the regulator introduced a limit on how many shares investors could buy from an IPO. An investor could order a maximum 10% of the IPO’s total value of shares. The policy took effect on Nov 17, which is the circular’s issue date.
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The order limit rule aims to address price volatility of small IPOs because “certain parties order a large amount of shares and potentially increase price fluctuation risks in the secondary market if they decide to sell the shares,” according to a separate statement explaining the policy.
The Jakarta exchange has seen 24 maiden share sales this year, raising about US$930 million and exceeding IPO proceeds in 2024, according to data compiled by Bloomberg.
The OJK also proposed several incentives to encourage companies to have higher free floats, including lower tax and listing fees, Djajadi said. On the other hand, it plans to impose levies and trade suspension, or delist companies that fail to fulfil the minimum requirement.
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