CNBC & SGX | PowerPR Indonesia Investment Forum Singapore
Indonesian Stock Market Boasts Huge Growth Potential: Director
A woman passes by a logo of the Indonesia Stock Exchange. (JG Photo/Jurnasyanto Sukarno)
Singapore. With steady economic growth and a huge population, Indonesia’s stock market still has the potential to grow much more, said a director of the Indonesia Stock Exchange (IDX) on Wednesday.
Speaking on the margins of the Indonesia Investment Forum in Singapore on Wednesday, Friderica Widyasari Dewi, the IDX development director, said that the Indonesian stock market’s capitalization was at around 50 percent of the gross domestic product per capita — still low compared to the ratio in other countries which could reach more than 100 percent.
The Indonesian economy grew by an annual average of 5.58 percent in the past decade, with growth in 2012 at 6.23 percent, while the GDP per capita had grown from $925 in 2002 to $3,563 last year.
“The population of Indonesia is currently still at 240 million and in 2030 the figure is estimated to reach 280 million with the middle class accounting for some 170 million,” Friderica said. “At present there are only about 100,000 investors, therefore the potential for stock market growth is still huge.”
She said that in the past decade, the Indonesian real GDP was in the third place among countries of Brics (Brazil, Russia, India, China and South Africa) and the Organization for Economic Cooperation and Development, after China and India, respectively.
“But from the deviation standard, the Indonesian GDP growth only has a deviation of 0.86 percent compared to China and India who have them respectively at 2.02 percent and 1.85 percent,” Friderica said.
She added that in the next 15 years, the IDX will likely see a significant increase in revenue as more potential investors join the transactions.
The local bourse has launched an intense marketing campaign in cooperation with 30 Indonesian universities to attract new investors, she said, adding that the IDX will open a gallery in Sumba, East Nusa Tenggara, on May 30 in an effort to boost relationships with investors there.
The bourse is also studying thousands of companies which are deemed eligible to join the stock exchange, which could boost capitalization, she said.
“There is a projection which shows that in the next 30 years, Indonesia can become a country with the world’s strongest economy. The Indonesian market will become increasingly stronger, and our room to grow remains really wide open. There are about 3,000 companies which are really eligible to enter the stock market,” she said.
Her statement was supported by an IDX survey of 100 companies that showed 70 percent of respondents were interested in entering the stock exchange, but did not yet have the courage to do so.
“We are therefore trying to be more proactive, going to those interested companies to help them take the step,” Friderica said.
Compared to 11 other stock exchanges in the Asia-Pacific region, the IDX ranked 8th in terms of capitalization, ahead of neighbors Malaysia, Thailand and the Philippines.
Friderica also said that compared to other world bourses, investments in stock exchanges of Brics often yielded much higher returns.
She said that for example, an investor putting $100 in a world stock exchange would see a return of $178 after a decade, but if the fund was invested in a Brics bourse, the return could reach $455.55.
“If it was invested in Indonesia, the same amount of funds would yield up to $1,044.01 in the same period, much higher,” she said.
The three-day Indonesia Investment Forum, hosted by Investor Daily newspaper and Power PR, ends on Friday.