The international money managers are freshly reminded of the lack of transparency that comes along with investing in Indonesia’s $735 billion stock market.
Indonesia’s biggest company by market capitalization ($85 billion), PT Barito Renewables is a geothermal power producer controlled by one of the richest tycoons of the country. Witnessing a surge of 1200% the share price chart of the company is similar to that of an emerging market penny stock. Punctuated by two crashes which are more than 40%. The company reached this position over a short span of nine months.
Among the companies worldwide that are valued at $50 billion or based on 30 day volatility, Barito’s swings are wild and extreme. Stoked fevered trading among retail investors have left perplexed analysts. They challenged the regulator’s attempts to introduce more order to a growing volatile market of Indonesia.
The international money managers are freshly reminded of the lack of transparency that comes along with investing in Indonesia’s $735 billion stock market.
The Indonesian authorities have refused to give out information or disclose the details behind trading curbs. Although Barito gave a vague explanation of how their shares swung beyond the roof.
According to Barito This controversy dates back to 2023 June when there was a new watchlist launched by the stock exchange for volatile and troubled companies. In March, while implementing a “full call auction” on all watchlist firms, the company went through an added pressure by bourse.
The procedure remains the same buy and sell orders which is commonly used by major exchanges globally during the trading from start to close. The auction would take place four to five times throughout the day rather than transitioning to continuous trading. In late May, the Indonesia Stock Exchange placed Barito Renewables on the list citing “significant increase” in the share price without specific reasoning.
As a result the market in Indonesia responded swiftly.
In the following two weeks the company shares toppled over by almost half, wiping out $58 billion (700 trillion Rupiah). This act dragged down the Jakarta Stock Exchange Composite Index’s benchmark by almost 5%.
The local traders in Indonesia grew angry due to the inclusion and argued that it would affect the market stability and temper with the results. As a rebellious act, the stock exchange office received funeral flowers urging death to the auction. A petition on Change.org signed by 16,000 users is calling for its revocation.
Since the public market debut in October in one of the country’s most anticipated listings, billionaire Prajogo Pangestu bought 48 billion shares which escalated the surge to 1324%.
Merely, the corporate secretary of the firm made a statement that Mr. Prajogo’s stake is a reflection of his confidence in the firm. Post the massive outcry, the regulators were pushed to remove Barito Renewables from the watchlist in late June.
Majority of the firm is owned by PT Barito Pacific and has one company analyst rating which is again majorly owned by Mr. Prajogo. It trades at 637 times 12 months forward earrings which is three times more than Adani Green energy.
In the start of 2024, Indonesia’s bourse checked for stock manipulation in another firm which is owned by Mr. Prajogo. It had surged more than 6000% since the initial listing. Investors worry that entering the watchlist can trigger the traders.
At the end of May, under the MNC group there were four companies that were placed in the watchlist including PT MNC Asia Holding. That stock fell 60% in the two weeks following the placement. Within three weeks of its inclusion in the same month, restaurant manager PT Sari Kreasi Boga’s shares fell by over 70%.
Analysts believe the uncertainty will hasten the outflow of foreign money. Broad macro concerns about uncertain fiscal policies and a weak rupiah led Morgan Stanley and HSBC Holdings to lower the country’s stocks in June.