JAKARTA: The Indonesia Stock Exchange (IDX) has raised the bar for initial public offerings (IPOs) despite sluggish listing activity so far this year, as it prioritises investor protection.
Analysts viewed the move as necessary to maintain investor confidence in the long-term, although it could come at the cost of fewer IPOs, making it harder for the IDX to meet its listing target. Only seven companies have gone public this year as of the third quarter, a far cry from the 2026 target of 50 the bourse had set for itself.
With only three months left in the year, IPO activity looks set to extend a slowdown seen over the past years, with 26 listings in 2025, 41 in 2024 and 79 in 2023.
Meanwhile, companies seeking to list their shares on the bourse now face tighter IPO rules as part of the IDX’s ongoing capital market reforms.
The latest set of revised listing rules, which took effect on Oct 9, raised financial requirements for prospective issuers and requires listed companies to maintain retained earnings to stay on the bourse’s main board.
Applicants are also required to submit five-year financial projections following their listing and an equity research report. Since March, applicants have been subject to a tiered framework that sets the minimum free float requirement at 15%, 20% and 25%, depending on market capitalisation.
However, the bourse allows candidate companies to propose certain shareholdings of more than 5% to be categorised as free float shares, provided they meet certain criteria.
Additionally, the IDX said it “provides flexibility” by no longer stipulating a minimum public offering price to “optimise the amount of funds raised, while enabling prospective investors to acquire shares at more affordable prices”.
It also allows prospective firms to reserve a company code and listed companies to change theirs.
IDX assessment director Saidu Solihin told The Jakarta Post on Monday that these adjustments focused on “improving the quality of companies listed on the bourse, strengthening investor protection and adapting regulations to developments and the needs of the capital market”.
“Through this measure, the IDX hopes to strengthen investor confidence while supporting companies that are ready to raise funds through the capital market,” he added.
The exchange has revealed that it currently rejected some 60% of listing applications, up sharply from the previous rate of around 20% to 30%.
Saidu pointed to various considerations for assessing IPO applications, particularly the completeness and consistency of prospective issuers’ documentation, the clarity of their plans for the use of funds, as well as the ability to implement corporate governance and fulfill their obligations as a public company.
“During the review process, these aspects may require further clarification or refinement. Listing approval is granted once the prospective listed company has met the requirements, taking into account the circumstances of each company,” he said.
With stricter requirements for IPOs, analysts predicted lackluster listing activity to continue. RHB Sekuritas analyst Andrey Wijaya told the Post on Tuesday that achieving 50 IPOs would be challenging, as the new rules might extend the preparation process and cause prospective issuers to delay their initial listings.
This comes as the IPO market faces weak investor demand, suboptimal market conditions and valuation concerns, he added.
Andrey said tightening criteria for public listings would help ensure only prospective firms with “more mature” financial conditions, business models and governance entered the market, but a recovery of IPO volumes would depend on improved sentiment and market capacity to absorb new supply.
Elandry Pratama, capital market analyst and branch manager at Panin Sekuritas Pondok Indah, said the IDX’s more selective approach could hamper listings particularly by companies with weak financial positions or business projections that lack sufficient supporting assumptions.
He warned that the low IPO volume could limit the supply of new shares and potentially dampen fundraising opportunities in the local capital market.
“In the short term, the process to an IPO may become more challenging, but in the long term, this regulation is expected to increase the quality of listed companies,” he told the Post on Tuesday.
Both analysts said the new listing rules would not weigh on the IDX Composite index, which is down more than 30% since the start of the year.
“The index’s movement is largely driven by big-cap issuers, economic conditions, foreign capital flows and market sentiment. Stricter IPO requirements could serve as positive sentiment for investor confidence if followed by improved issuer quality and transparency,” said Elandry.
Similarly, Andrey from RHB Sekuritas said a low IPO volume did not automatically put pressure on the benchmark index. — The Jakarta Post/ANN
