One of the wealthiest tycoons in the nation controls PT Barito Renewables Energy, a $85 billion generator of geothermal electricity and Indonesia's largest corporation by market value.
Following significant public protest, the agency ultimately took Barito Renewables off the radar late last month without providing an explanation.
Its share price trajectory is similar to that of an emerging-market penny stock, with two falls totaling more than 40% in less than nine months, interspersed with a 1,200% gain.
However, PT Barito Renewables Energy, a $85 billion generator of geothermal electricity under the ownership of one of Indonesia's wealthiest tycoons, is the largest firm in the nation by market value.
Barito's wild swings have confused professional analysts, fueled frenetic trading among retail investors, and now challenged regulators' attempts to bring more order to an increasingly volatile market. Barito's swings are the most extreme among companies globally valued at $50 billion or more based on 30-day volatility.
International money managers are being reminded by this instance of the often opaque nature of investing in Indonesia's $735 billion stock market. While Indonesian authorities have resisted providing details behind trading restrictions put in place late May that opponents claim have increased the stock's volatility, Barito has made few statements that may clarify why its shares have fluctuated so much.
"Intended for investor protection, the trading restrictions ironically undermined broader investor confidence," said Mohit Mirpuri, a fund manager at SGMC Capital Pte., located in Singapore. "Risk-averse investors will probably be discouraged by this situation in the near future, particularly if it is thought to be a sign of wider market volatility or regulatory issues."
The stock market introduced a new watchlist for erratic and troublesome businesses in June of last year, which is when the uproar began. Regulators saw the board as a carefully designed panacea to restore credibility to the biggest stock market in Southeast Asia, which had been beset by excessive volatility and declining liquidity. A firm may be placed on the watchlist in accordance with exchange regulations if it has zero revenue growth, thin liquidity, or three months of trading below 51 rupiah.
The exchange increased the pressure on these businesses in March by holding a "full call auction" for all watchlist entities. The system, which is often used by significant exchanges worldwide during the opening and closing of trade, matches buy and sell orders. However, the auction would take place four or five times over the day rather than switching to continuous trade.
The limitations were first greeted with little attention. That is, until Barito Renewables was added to the list by the Indonesia Stock Exchange in late May. The exchange cited the company's "significant increase" in share price as its only justification, providing no more details.
The market gave a prompt reaction. The company's shares fell by about half in the next two weeks, wiping away around 700 trillion rupiah ($43 billion) and causing the benchmark Jakarta Stock Exchange Composite Index to decline by nearly 5%. The company's participation in FTSE Russell's big cap index, which would have attracted further international investment, was postponed due to the fluctuations.
Local merchants were incensed by the addition as well, claiming that it undermined market stability and reduced profits. They disobeyed by sending the exchange's office many funeral flower arrangements, pleading with death to go to the auction. 16,000 people have signed a Change.org petition asking for its reversal.
The exchange has justified the limitations, claiming that they have improved liquidity and price discovery for a number of penny stocks. Inarno Djajadi, Capital Market Supervisor for the Financial Services Authority, said that the regulator compares its policies to comparable laws in other nations.
Since then, the company's billionaire owner Prajogo Pangestu has acquired an additional 48 million shares. Since the company's October 1st public market debut—one of the most anticipated listings in the nation—it has increased in value by as much as 1,342%. Prajogo's increase in ownership, according to the company's corporate secretary Merly, is a reflection of his optimism about the company's future.
Following significant public protest, the agency ultimately took Barito Renewables off the radar late last month without providing an explanation. Reporters were informed by Exchange Director Jeffrey Hendrik that increased liquidity was the reason for the withdrawal of many equities.
Bloomberg data shows that Barito Renewables has a single corporate analyst rating. Prajogo owns PT Barito Pacific, which owns the bulk of the company. It is now selling for more than three times Adani Green Energy Ltd., or 637 times 12-month forecast earnings. The Indonesian stock exchange investigated potential stock manipulation earlier this year in relation to another Prajogo-owned company whose shares had increased by almost 6,000% since listing.
Investors fear that traders may react irrationally if they are added to the watchlist. At the end of May, four MNC Group companies—including PT MNC Asia Holding—were added on a watchlist. Within two weeks after the placement, that stock fell sixty percent. After being included in the same month, the shares of restaurant management PT Sari Kreasi Boga fell by about 70% in only three weeks.
People are selling in a panic once shares go into the full call auction because it's like being in a dark jail, according to Hasan Zein Mahmud, a former exchange director and Sari Kreasi investor.
Experts predict that the unpredictability will accelerate the outflow of foreign investment. The nation's equities were previously downgraded last month by Morgan Stanley and HSBC Holdings Plc due to broad macro worries about an unpredictable fiscal strategy and a weak rupiah.
The full call auction rule may be advantageous for penny companies that are modest in size. However, considering the less transparent and market-driven procedure, big ones like Barito could potentially discourage investors, particularly foreign capital, according to Bloomberg Intelligence analyst Sufianti.
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