During the last 5 (five) years, the value of stock transactions and market capitalization on the Indonesian stock exchanges increased with the compound annual growth rate (CAGR) of 4% and 11%. The growth table value of stock transactions and market capitalization are as follows:
Indonesia Stock Exchange Transaction
*Rasio Turnover = Nilai transaksi/ Kapitalisasi Pasar)
Although in terms of growth of Indonesia stock exchange continues to experience growth, but both turnover ratio and stock market capitalization of Indonesia is still in the position of dozens and below Thailand as shown in the table below:
Indonesia’s stock Exchange Market Capitalization compared to regional in 2016
Indonesia’s stock Exchange Market Turnover Ratio compared to regional in 2016
Source: WFE, Processed by PEI
In order to improve the liquidity of stock transactions, SRO decided to form a Securities Financing Company in Indonesia. Based on World Federation of Exchange data on world capital market conditions in 2016, there is a positive correlation between the existence of Securities Financing Company with the value of transactions and market capitalization of a country.
The figure above shows that countries with securities funding companies have larger domestic market capitalization and turnover ratios as compared to countries that do not yet have securities funding companies. The presence of securities funding companies in capital market of several developed countries proves that these institutions are able to improve the capital market liquidity and efficiency.
Some countries in Asia which have securities funding:
Source: WFE; Processed by PEI
Growth in various aspects of the Indonesian stock exchange demands capacity building in Exchange Members. A very tight capacity increase by funding sources as a major factor in order to increase the transaction expected by the SRO to be realized. Currently, the funding sources are very limited because banks cannot accept securities as collateral.
Based on sampling conducted by PT Pendanaan Efek Indonesia (PEI) or “the Company” on audited financial statements 2016 from 20 AB with adjusted net working capital above Rp250 billion, 3 (three) AB (15%) recorded a facility bank, 1 (satu) AB (5%) had Medium Term Note (MTN), 8 AB (40%) reported sub-loans of shareholders, and 8 (eight) AB (40%) did not record any bank facilities or other sources of funding beyond equity. In addition to the subordinated loan obtained from the above 8 (eight) AB is a subsidiary of the Bank.
The Company’s presence is a solution to the limited financing facilities that Exchange Members can obtain from the banking sector or other sources to finance securities transactions. Furthermore, there is no special institution that facilitates the funding of securities transactions in Indonesia’s capital market.
The Company was established based on Deed of Establishment Number 15 dated December 27, 2016 owned by SRO, namely Indonesia Stock Exchange (IDX), PT Kliring Penjaminan Efek Indonesia (KPEI), and PT Kustodian Sentral Efek Indonesia (KSEI). The Company is part of the Financial Services Authority (OJK) Masterplan 2015-2019 to enhance efficiency and stability in the Financial Services Sector (SJK), part of the IDX Masterplan program 2016-2020, and is also one of the programs in the KPEI Corporate Business Strategy 2016-2020.
Currently, the Regulation on Securities Financing Institution (LPE) in the process of preparation by OJK as the supervisor of Indonesia’s Capital Market. Under this regulation, the Company will act as a fund provider for Securities Companies listed as Exchange Members aimed at improving liquidity, transaction value, and market capitalization.