Recovering Stock Performance, Short Selling and Stock Buyback Rules Reviewed

JAKARTA, KOMPAS - The capital market regulator held discussions with publicly listed company owners and market participants regarding the volatility of the Composite Stock Price Index (IHSG) in recent months. Policy evaluations are being conducted to maintain stock market liquidity, which has been under pressure due to the outflow of foreign investor funds.

The Financial Services Authority (OJK) and the Indonesia Stock Exchange (BEI) held a dialogue event at the Main Hall of the Indonesia Stock Exchange, Jakarta, on Monday (3/3/2025) from midday until just before the breaking of the fast. Several market participants, including issuers' owners and management, stock exchange members, and media leaders, were invited to the discussion.

The Chief Executive of the Financial Services Authority (OJK) for Capital Market Supervision, Derivative Finance, and Carbon Exchange (PMDK), Inarno Djajadi, explained that from the discussion, they identified the concerns of stakeholders in the capital market, particularly regarding the recent pressure on the Composite Stock Price Index (IHSG).

"Therefore, OJK will take initial policy measures to, first, postpone the implementation of short selling activities. In addition to that, there is another policy option if necessary, namely reviewing share buybacks without a GMS, while still observing and considering the situations and conditions that may arise later," stated Inarno during a press conference following the discussion.

The implementation of short selling with an intraday scheme was previously planned to begin in March or April 2025. This trading is conducted when traders sell shares at a high price and buy them back when the price drops at the end of the same trading day. This product has been postponed due to its potential to increase supply amid low demand.

On the other hand, the buyback policy or the repurchase of shares by the company is expected to increase stock prices, thereby boosting demand. This policy is facilitated by allowing buybacks without requiring investor approval through a General Meeting of Shareholders (GMS).

The two policy evaluations, Inarno continued, focus on three aspects, namely market stability, liquidity enhancement, and the protection of both retail and institutional investors.

As is known, the JCI has experienced high fluctuations and tends to correct in recent times. On Monday's trading (3/3/2025), the JCI closed up 3.97 percent to 6,519. Meanwhile, on Friday (28/2), the JCI touched its lowest level in the last three years to 6,270, or corrected by around 11 percent, driven by the flight of foreign investor funds, with a net sales value of IDR 21.9 trillion.

BEI President Director Iman Rachman said that the current weakening of the JCI was more due to external factors, including US President Donald Trump's trade policies. However, this factor still needs to be restrained by maintaining domestic sentiment. BEI, he said, will try to maintain investor confidence by ensuring that investment product trading is fair, transparent, and efficient.

"If we look at it historically, our stock exchange has reached a lower index compared to the 11 percent year-to-date decline, and it was able to recover in less than a year. So, we have to be confident that we can. Moreover, fundamentally and domestically, we are quite perfect," he said.

Several owners and management of issuers who were present also responded positively to the capital market regulator's policy. President Director of PT Indika Energy Tbk (INDY), Arsjad Rasjid, one of them, assessed the OJK and BEI policies to change the positive buyback rules for issuers.

"If the buyback has to wait for the GMS process, you've missed the train," said the man who also serves as Chairman of the Advisory Board of the Indonesian Chamber of Commerce and Industry (Kadin).

Meanwhile, he suggested that the domestic market be strengthened to withstand foreign factors. One way to do this is by involving more institutional investors in the stock market.

President Director of PT Alamtri Resources Indonesia Tbk (ADRO) Garibaldi Thohir, who was also present there, also gave a positive assessment of the buyback policy evaluation. ADRO even plans to conduct a further buyback after on April 15, 2024 they obtained approval from investors in the GMS to conduct a buyback with a maximum budget of IDR 4 trillion.

"We are eagerly awaiting, but for the budget amount, I need to meet with the board of directors first. However, if the OJK opens, we are ready," he said.