Indonesia Looks Inward to Develop Top-Performing Stock Market
Indonesia Looks Inward to Develop Top-Performing Stock Market

Indonesia has been bullish of late.  Its stock market gained more than 50 percent this year, making it Southeast Asia's best performer, and the fifth-best worldwide.  But the director of Indonesia's stock exchange says more work remains if Indonesia is to catch up with its more affluent neighbors, Singapore and Malaysia.  

Indonesian Stock Exchange President Director Ito Warsito says the market has a history of volatility.

"If you look at the history of the Jakarta Composite Index, we experienced high growth in 2006-2007 - both years the index grew by more than 50 percent," said Warsito.  "But in the year 2008, it also tumbled more than 50 percent because of the world financial crisis."

The rise is due in part to strong prices for Indonesia's natural resources, and to increased confidence in the country's political system.

Indonesia's Stock Exchange is small compared with Asia's heavy hitters, such as India.  But Warsito says political stability and new regulations aimed at making it easier for companies to go public could expand it rapidly.

"We target that by the end of 2012 we should have 2.3-million investors," said Warsito. "Currently we have 350,000.  People say they are quite skeptical, but I believe we have to work as hard as possible and we have to leverage the development of the Internet technology."

About two-thirds of Indonesia's stocks are held by foreign investors, which worries those who watched Thursday as a rebound in the dollar dragged down regional markets.

Warsito says his goal of doubling the stock market's value will depend on a stronger domestic presence.

"I do not think we can balance the foreign investors because when the domestic investor base is developing, there will be more foreign investors also," said Warsito.  "So in terms of composition, foreign investors will still dominate the ownership of free flow stocks, but at least we can achieve a widespread investor base, not only in Java, but also in the whole part of Indonesia."

Warsito hopes to have state-owned companies listed on the exchange, as well as the Indonesian units of mining giants Freeport McMoRan Copper and Gold and Newmont Mining Corporation.  He also says by improving risk management, market transparency and law enforcement, Indonesia can convince domestic investors that it is a safe place to put their money.