Currently, Singapore remains the largest stock exchange in the ASEAN region with a market capitalization of about USD $640 billion (in 2015), nearly twice the size of Indonesia’s stock exchange (the market capitalization is the number of total outstanding shares at the exchange multiplied by their stock prices).
By 2020 the Indonesia Stock Exchange wants to see the daily transaction value rise up to IDR 35 trillion (approx. USD $2.6 billion) from IDR 5.6 trillion currently, while the number of listed companies is targeted to grow some 40 percent from 531 currently to at least 751 by 2020. This would make it possible for the Indonesia Stock Exchange to replace Singapore as the largest stock exchange in the ASEAN region based on market capitalization. This would be fitting as Indonesia already is the largest economy in the ASEAN and Southeast Asian region. Moreover, the Indonesian government has ambitious plans to boost foreign investment as well as infrastructure development. Stock investors should tap this potential.
In order to make the Indonesia Stock Exchange bigger, the quality of brokerages has to be enhanced, the number of active (stock) investors needs to be raised, and there needs to be another wave of deregulation in order to open the Indonesian stock market to foreigners (currently it is hard for foreigners to engage in stock trading on the IDX if they do not have a KITAS and Indonesian tax number). Moreover, in order to attract more companies to conduct an initial public offering (IPO) on the IDX, the permitting process (and costs) for an IPO should be made easier.
Moreover, it is advised that the many (and large) state-controlled entities – that all play a big role in the Indonesian economy – become (partly) privatized through a listing on the IDX. These companies can become strong blue chips (most of the big private companies in Indonesia are already listed on the IDX). Also, the country’s numerous medium-sized enterprises should be encouraged to go public on the IDX (together with the small-sized companies they account for the majority of economic activity in Indonesia; there are some 50 million small and mid-sized companies in Indonesia, hence if only 0.1 percent of them would decide to go public it already constitutes an impressive figure). Medium sized companies can be encouraged to go public by being offered tax incentives.
Lastly, on the demand side, Indonesia’s rapidly expanding middle class (which currently already numbers some 90 million people) forms a potentially huge investor base that needs to be educated about the advantages (and obviously about the risks) of investing in the stock market.