Indonesian President Joko “Jokowi” Widodo has called on stakeholders to protect investors’ trust by “cleaning up” the capital market from manipulation practices in a bid to boost fundraising efforts as the Indonesia Stock Exchange (IDX) kicked off this year’s first trading day on Thursday.

He said the country should build investors’ trust by creating a transparent and valid transaction system as Indonesia had been named one the most preferred emerging markets by a Bloomberg survey of 57 global investors, strategists and traders on their outlook for 2020.

“Do not let anybody play [with penny stocks]. This is about trust. Provide [investors] protection,” Jokowi said during his remarks at the IDX building in South Jakarta.

“We must crack down on manipulation [practices] in the [capital] market and financial transactions, which have led to fraud and criminal activities . . . I am hoping that 2020 can be an opportunity for the OJK [Financial Services Authority] and the IDX to clean up the capital market from manipulators. Clean it up and stop them!” he said.

Playing penny stocks can lead to skyrocketing returns for investors, but it could also incur losses for others as the jumps in stock prices are not based on companies’ financial performances.

In addition to the practice, other forms of misconduct also occurred at the bourse throughout 2019.

Last year, the IDX and the OJK imposed sanctions on several companies, such as national flag carrier Garuda Indonesia and property firm PT Hanson International, for issuing financial statements that were not in line with accounting standards. The OJK also fined Hanson International for an under-the-table deposit scheme that collected a total of 2.4 trillion rupiah ($172 million) in public funds.

“The instruments of investment need integrity in terms of track record and valuation,” said Finance Minister Sri Mulyani Indrawati, who was with the Jokowi at the IDX building, adding that “integrity could help investors gain knowledge on investment risks and returns based on their appetite”.

The government, she added, will work with the OJK, Bank Indonesia and the Financial System Stability Committee to enhance the trust of both local and foreign investors.

Indonesia’s assets, namely bonds and stocks, are one of the most-favoured instruments among investors heading into 2020 as developing-nation assets will outperform their developed peers, with Asia having the best prospects, according to a Bloomberg survey.

Undeterred manipulation

The Jakarta Composite Index, the IDX’s main gauge, closed Thursday’s trading in the red, weakening by 0.25 per cent to 6,283.58 from its previous close – after jumping as high as 0.28 per cent at the opening.

The index gained a modest 1.7 per cent growth over the full year of 2019, not nearly enough to make up for the 2.54 per cent contraction recorded in 2018. The local bourse recorded net foreign buys of 44.63 trillion rupiah last year.

“The IDX has issued several regulations, such as suspending stock trading and [issuing the label] ‘unusual market activity’, but the regulations have not deterred manipulation practices,” said Koneksi Capital research head Alfred Nainggolan.

“The OJK, meanwhile, should crack down on such practices as it holds the authority to investigate and audit market activities.”

Alfred was of the view that manipulation practices had resulted in stock market volatility, which impacted the investment appetite of both institutional and retail investors.

“High volatility would trigger higher risks. Of course, the situation will lower investment appetite.”

The government, he went on to say, should proactively build confidence among investors interested in investing in Indonesia by boosting economic growth, reducing the current account deficit (CAD) and issuing policies that could improve the sluggish performance of state-owned companies listed at the IDX.

IDX development director Hasan Fawzi told reporters that the board would work to prevent further attempts at market manipulation.

“The president’s message will be our guideline for preventing manipulation practices. If there any indications of such practices, we will crack down on them according to the regulations,” he stressed.

Hasan said global trade disputes between several countries would still dictate market moves in 2020, adding that the IDX had set a target of more than 57 initial public offerings (IPOs) this year to surpass the number of IPOs in 2018.

OJK board of commissioners chairman Wimboh Santoso said during his remarks at the same event on Thursday that the OJK was committed to developing the capital market by preparing several policies.

“First, we are planning to improve corporate governance to build the trust of investors and market players in Indonesia’s capital market. Second, will expand the role of the capital market in funding strategic government projects by providing incentives to listed companies,” Wimboh said.

The OJK would encourage more small and medium-sized enterprises (SMEs) to list their shares on the stock market by simplifying IPO rules and transparency obligations through digital platforms, he added.

However, he did not discuss the OJK’s efforts to clamp down on manipulation practices in the stock market.

THE JAKARTA POST/ASIA NEWS NETWORK