Indonesian shares were on course Friday for their sharpest weekly fall since late June, pressured by a stock-exchange rule change that reset the market’s lower pricing threshold.
Jakarta-listed stocks have fallen roughly 4.5% this week. The decline followed the implementation of a new Indonesia Stock Exchange rule on Monday that reduced the minimum share price to 1 rupiah from the previous 50 rupiah floor. The adjustment allowed shares previously unable to trade below the old minimum to move lower.
The exchange also dropped several market-related requirements covering share prices, liquidity and the amount of stock available for trading. Those changes came as the market began applying a phased minimum free-float requirement of 15%.
However, the IDX kept standards tied to corporate condition and legal status, including whether a company can generate revenue, is facing bankruptcy, or is entering debt restructuring.
Indonesia’s equity market has been the weakest in the region this year, with losses exceeding 30%. Selling pressure intensified after MSCI warned in January of a possible downgrade, citing unclear ownership structures, limited visibility on free float and concerns over trading data reliability.
The stock-market overhaul is aimed at improving liquidity and price formation after global index providers raised transparency concerns earlier this year.
MSCI is expected to announce the result of its review of Indonesia’s market reforms in November, after extending the evaluation period.
