Faisal Maliki Baskoro, Jakarta – Indonesia's financial regulator has set a target of 5 million domestic investors in the country's financial market by 2021 to reduce reliance on foreign investment, which in times of global uncertainty could undermine economic stability.
Indonesia currently has more than 995,000 individual stock market investors, based on their single investor identification (SID) numbers, said Hoesen, chief executive of capital market supervision at the Financial Services Authority (OJK). There are 1.39 million investors in mutual funds and more than 272,000 in government bonds.
"In the next three years, we are targeting a total of 5 million SIDs, of which 40 percent will be stock market investors," he said on the sidelines of the 42nd anniversary of the Indonesia Stock Exchange (IDX) on Monday.
Foreign investors account for the lion's share of daily trade on the IDX and owned 47 percent of Indonesian government bonds at the end of the second quarter. Their presence has helped bring in overseas capital, useful for plugging the country's current-account deficit.
But unlike foreign direct investment sunk into local projects or new companies, foreign money in financial markets can easily flee the country at the slightest concern of recession elsewhere in the world. That complicates Indonesia's efforts to maintain the stability of its currency and economy.
"Efforts to deepen the capital market become important, both in terms of supply and demand, because many things rely on the capital market now," OJK chairman Wimboh Santoso said.
The number of companies listed on the IDX has risen 25 percent to 634 in the past four years, compared with Thailand's 16 percent and Vietnam's 24 percent.
So far this year, companies have raised a total of Rp 109 trillion ($7.6 billion) from initial public offerings, rights issuances or bonds. The government has issued Rp 113 trillion in bonds during the same period.
"The capital market has more room [compared with banks] for entrepreneurs to raise funds," Wimboh said, especially for those that need long-term funding.
But the capital market continues to lag compared with banks. Market capitalization on the IDX only grew 2.58 percent to Rp 7,205 trillion so far this year compared with banks that booked over 4 percent growth in outstanding loans.
"Growth has become more difficult. In the past three years, our [gross domestic product] growth has been between 5.1 percent and 5.2 percent," Wimboh said, noting that the government has put several policies in place to boost the local economy.
"The capital market can grow more if the real sector rises. We expect more capital market growth in the future," he said.