Indonesia faces record share sales to meet free-float goal

JAKARTA – Indonesia is bracing itself for a record amount of share sales to meet tougher free-float rules aimed at heading off a potential downgrade to frontier market status by MSCI.

The Indonesia Stock Exchange estimates that 267 firms will need to lift their public shareholdings to 15 per cent, up from the current 7.5 per cent minimum, implying share sales worth about 187 trillion rupiah (S$14 billion), according to listing director I Gede Nyoman Yetna.

That is a scale of annual issuance the market has never seen before and equates to roughly four times its two-decade annual average, before excluding any unreported deals or informal block trades, according to data compiled by Bloomberg. For a market already struggling with credibility issues and foreign outflows, a record issuance will add another layer of pressure.

“It’ll be hard for it to get absorbed by the market,” said Bloomberg Intelligence strategist Sufianti, who goes by one name. “The big amount and the uneven liquidity across securities may complicate absorption of additional supply.”

The push follows index provider MSCI’s warning in January that Indonesia might be downgraded to frontier market status over concerns about investability and limited free float, a move that triggered the worst market rout in nearly three decades. Regulators are now scrambling to restore credibility, boost liquidity and reassure global investors that the market remains accessible.

The Indonesian authorities have pledged to satisfy MSCI’s concerns by March. Along with the higher free-float requirement, steps to be taken include tightening the disclosure threshold for significant shareholdings to 1 per cent from 5 per cent, and buying by sovereign wealth fund Danantara. The country has also seen leadership changes at its exchange and regulatory bodies.

Still, some analysts say the market has the depth to handle the expected wave of share sales.

“Indonesia has enough investors – local and foreigner – to absorb these share sales from companies and controlling families,” said Mr Nirgunan Tiruchelvam, an analyst at Aletheia Capital. “It will help in meeting MSCI’s demands to an extent.”

Meanwhile, initial public offerings will also have to meet a higher bar for free float at 15 per cent to 25 per cent, depending on the company’s market capitalisation. That compares with the current requirement of 10 per cent to 20 per cent, depending on equity position.

No company has gone public in the nation so far in 2026. Indonesian listings raised US$1.1 billion (S$1.4 billion) in 2025, Bloomberg data shows. BLOOMBERG