Harry Suhartono and Tassia Sipahutar – Fears among retail investors about some of their mutual-fund investments have triggered a sell-off in Indonesian stocks, with the nation's benchmark index heading for its longest run of weekly losses since April 2018.
Friday's 0.7% gain in the Jakarta Composite Index was too little to undo the slide of the past six days. Down 1.7% this week, the benchmark gauge was set for a fifth straight weekly decline and a drop of 3.7% for the month.
Local portal Kontan reported last week that two of PT Narada Aset Manajemen's mutual funds failed to meet redemption demand from investors, citing an official at the Financial Services Authority. Indonesia's financial regulator also ordered PT Minna Padi Aset Manajemen to liquidate six of its mutual funds in order to meet withdrawal requests, Kontan reported on Nov. 25. Calls to Narada, Minna Padi and the FSA went unanswered.
"The recent drop in some small-cap stocks has led to a significant decline in the net asset value of some mutual funds," said John Teja, a director at PT Ciptadana Sekuritas Asia. "This has raised concerns among retail investors, which led to redemptions of some mutual-fund products and dragged down the overall market."
The five biggest decliners in the Jakarta Composite Index this month are companies with a market value of less than 1 trillion rupiah ($71 million). They all have lost at least 74% of their value. Investors have previously warned that that thin liquidity around small-cap shares could fuel excessive volatility.