Indonesian Capital Market Update During The Coronavirus Pandemic


To generally calm the market from its consistent downward volatility amid the global coronavirus pandemic, the relevant Indonesian government authorities have taken several actions. These include (i) the suspension of all short selling transactions implemented by the Indonesia Stock Exchange (“IDX”) and (ii) the introduction by the Indonesian Financial Services Authority (“OJK”) of a new policy on share buybacks.

IDX Suspends Short Selling

The IDX suspended short selling as the Jakarta Composite Index (“JCI”) was in a free-fall, continuing its losses since the start of 2020. The IDX believed the stock market correction in Indonesia was mirroring similar losses around the world over fears of the coronavirus pandemic.

The IDX suspension resulted from a coordination meeting attended by IDX officials and Indonesian President Joko Widodo, together with other financial industry regulators, including OJK, Bank Indonesia and Ministry of Finance officials.

The suspension of short selling was declared effective upon the issuance of IDX Circular Letter No. S-01419/BELPOP/03-2020 on Provisions Relating to Short Selling Transactions dated March 2, 2020. It is further reiterated through IDX Announcement No. Peng-00058/BEI.POP/03-2020 on the Revocation of the List of Securities that Can Be Transacted Through Short Selling dated March 2, 2020 (“IDX Announcement 058”).

Under IDX Announcement 058, all securities stipulated by the IDX as securities or shares eligible for short selling transactions, as stated in item I.e. of IDX Announcement No. Peng-00054/BEI.POP/02-2020 on Securities that Can Be Transacted and Guaranteed in the Context of Margin Transactions and/or Short Selling Transactions dated February 28, 2020, are now prohibited from being transacted by way of short selling in Indonesia for an indefinite period.

Current IDX Policy on Short Selling

In essence, the IDX has adopted three policies regarding short selling transactions as of this writing:

  1. The IDX will not issue any list of securities that can be traded through short selling transactions for an indefinite period;

  2. The IDX will not entertain any applications requesting short selling transactions, even if requested by Securities Exchange members, for an indefinite period; and

  3. Securities Exchange members are obliged to ensure that any transaction carried out, both for the benefit of Securities Exchange members and/or their customers, is not a short selling transaction.

The above prohibition applies to any natural or legal person irrespective of their country of residence, including all qualified investors and securities companies listed on the IDX website which had previously obtained approval from the IDX to carry out short selling transactions.

OJK Policy on Share Buybacks

The week after the IDX introduced its prohibition on short selling, the OJK, also taking into account the pressure of the global pandemic and the plunging JCI, which had fallen about 18.46% since the start of the year, issued Circular Letter No.3/SEOJK.04/2020 dated March 9, 2020, on Other Significantly Fluctuating Market Conditions for the Performance of Buyback of Shares Issued by Issuers or Public Companies (“OJK Circular Letter No. 3/2020”).

On March 16, 2020, the OJK issued Circular Letter No. S-89/D.04/2020 to further clarify procedures for share buybacks as set forth in OJK Circular Letter No. 3/2020 (“OJK Circular Letter No. S-89/2020”). In principle, OJK Circular Letter No. S-89/2020 regulates procedures for issuers or public companies (i) to provide written disclosure of information according to the required timeline and (ii) to satisfy the stipulated mechanism for the refloat of treasury shares.

Share Buyback Without a GMS

Under OJK Circular Letter No. 3/2020, issuers and public companies can now conduct share buybacks without convening a General Meeting of Shareholders (“GMS”). In addition, the number of shares that can be repurchased by issuers and public companies can now be more than 10% of paid-up capital and at most 20% of paid-up capital, provided that the outstanding shares are at least 7.5% of paid-up capital.

For the sake of clarity, the relaxed process of share buybacks without obtaining prior GMS approval is not mandatory in nature. This is merely an option for issuers and public companies, to allow them if they choose to expedite the timeline by being able to skip the approximately two months required to plan and hold a GMS to approve a share buyback.

With the issuance of OJK Circular Letter No. 3/2020 and OJK Circular Letter No. S-89/2020, the OJK is seeking to help reduce the impact of the coronavirus pandemic on the market by empowering issuers and public companies to execute expedited share buybacks without violating the provisions of applicable laws and regulations.


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For Further Information, please contact:

Ira A. EddymurthySoewito Suhardiman Eddymurthy Kardono iraeddymurthy@ssek.com