Billionaires’ stranglehold on Indonesian shares faces reckoning

JAKARTA – Indonesia’s stock market needed just two days of chaos to highlight what investors have long lamented: parts of the market are not freely traded.

Last week’s worst tumble in nearly three decades drew attention to a major problem at the heart of South-east Asia’s biggest equity market: a handful of billionaires own so much of their listed companies that barely any of those companies’ shares are left to trade.

At least three billionaires directly control 85 per cent or more of three listed companies, according to data compiled by the Bloomberg Billionaires Index based on recent filings.

South-east Asia’s richest person has a more than two-thirds indirect stake in Barito Renewables Energy, Indonesia’s largest listed firm. About seven billionaires own more than 50 per cent of shares in at least 13 companies, the data shows.

The concentration is now colliding with regulatory reform. Indonesia’s market watchdog said firms newly listing will be required to double their minimum free float – the number of shares available for public trading – to 15 per cent. Companies already trading will also have to follow eventually.

The regulator is responding to index compiler MSCI’s concerns about the investability of Indonesia’s US$870 billion (S$1.1 trillion) market, which triggered the rout. 

The MSCI warning “highlighted investor concerns on low free float, opaque shareholding structures and scope for share price manipulation by related parties”, said Mr Hasnain Malik, head of emerging-markets equity and geopolitics strategy at Tellimer in Dubai.

Investors have complained for years that the nation’s biggest companies are thinly traded and controlled by a handful of wealthy individuals.

Mr Prajogo Pangestu, the country’s richest person with a net worth of about US$35.2 billion, presides over 84 per cent of shares in mining firm Petrindo Jaya Kreasi and has a 68 per cent direct and indirect stake in Barito Renewables, according to calculations by Bloomberg News.

Others also have huge holdings. Billionaire Sri Prakash Lohia, whose business empire stretches across South-east Asia from fertilisers to medical gloves, owns 92.3 per cent of Indo-Rama Synthetics.

Mr Tahir, another tycoon who goes by a single name, controls roughly 86 per cent of Maha Properti Indonesia, a thinly traded property developer whose shares soared about 443 per cent over the past year. 

Their holdings are compounding a broader problem in Indonesia. About a quarter of companies listed on Jakarta’s stock exchange have a free float of 15 per cent or less, according to data compiled by Bloomberg, making ownership in the bourse among the most concentrated in the Asia-Pacific. That compares with about 6.9 per cent of companies in Malaysia, 3.3 per cent in Thailand, and 12 per cent in the Philippines, the data shows.

Critics argue that this level of concentration leaves Indonesia’s market unusually vulnerable to distortion. In 2025, the benchmark Jakarta Composite Index (JCI) surged 22 per cent. Over the same period, the MSCI Indonesia Index, which applies stricter investability rules, fell 3.6 per cent.

That gap “can clearly tell you that the JCI was distorted by some of these tightly held, concentrated ownership kind of companies”, said Mr Soh Chih Kai, who manages an ASEAN portfolio at Lion Global Investors in Singapore.

Last week, MSCI went further, warning that persistent ownership opacity may eventually cost Indonesia its emerging-market status – a designation that acts as a magnet for foreign capital.

In a statement, the index provider cited “fundamental investability issues”, including complex shareholding structures and the risk of coordinated behaviour influencing prices. It asked for greater transparency by May, or risk a downgrade to frontier-market status.

Opaque structures are hardly unusual in Indonesia, where wealthy families often control listed firms through layers of cross-holdings that are themselves publicly traded. MSCI said it needed more granular and reliable information to properly assess what is truly available to investors.

“Some of these points are valid,” Mr Homin Lee, a senior macro strategist at Lombard Odier, said at a briefing on Jan 29 in Singapore. “For the time being, we are a bit cautious.”

For larger conglomerates, meeting the higher free-float threshold may come with some pain. It will require substantial divestment, which would “inevitably create selling pressure”, said Mr Herditya Wicaksana, an analyst at MNC Sekuritas in Jakarta.

A spokesperson for Barito said the company is closely monitoring regulatory developments and will await further guidance. Indo-Rama Synthetics, Maha Properti Indonesia and Petrindo did not respond to questions from Bloomberg News about their ownership stakes or how they plan to meet the new free-float rules.

Regulators insist change is coming, if gradually. Ms Friderica Widyasari Dewi, the acting chair of the Financial Services Authority (FSA), said on Feb 1 that the higher free-float requirement would initially apply to new listings, with existing companies given a transition period. The FSA aims to implement a higher free float requirement by March at the latest.

“Raising free-float requirements can help create a healthier tradable base,” said Mr Ke Yan, the head of research at DZT Research in Singapore.

“But ownership transparency is just as important. Investors need clear disclosure of beneficial owners and affiliates so they can assess the true free float.” BLOOMBERG