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Transparency vital for world-class capital market

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James Bladen
James Bladen
James Bladen joined Alpha Southeast Asia in 2015. He has written on a wide range of issues covering capital markets, Islamic finance and M&A. He worked as a consultant in Indonesia (2013-2017) and moved to New York in 2020 where he continues to cover Southeast Asia. Disclosure: I have no direct investment holding in any stocks or bonds in Indonesia , and no plans to initiate any positions within the next 96 hours. The opinion expressed in this article is my own. I have no commercial relationship with any company cited on this website nor am I receiving any compensation from anyone except from Alpha Southeast Asia, controlling shareholder of www.whatinvestorswant.com

This year certainly presents a window of opportunity for Indonesia to raise the efficacy and integrity of its capital market.

As a low-beta market, Indonesia almost always underperforms on the upside, which isn’t necessarily a good thing in a hot market. But when global markets are cooling off like they are now, and volatility and uncertainty exist, Indonesia is seen as a safe haven.

We can already see this in the stock price performance among regional markets in the year to date. With a roughly 4.3% gain since January, the IDX has outperformed most of the regional indices, including the Shenzhen and Shanghai Composite Indices, Singapore’s Straits Times Index and Thailand’s SET.

And with palm oil prices rebounding in tandem with Indonesia’s broader economy, things are really looking up. IDX has already said it expects better trading volume and more initial public offerings in 2021.

So, given that Indonesia is a stock market which is continually seeking quality foreign capital to fund the growth of its companies so as to enhance its appeal as a capital-raising destination amidst regional competition, there is a commensurate need to step up its credentials.

Therefore, the integrity of the Indonesian capital market is of paramount importance. Indonesia has some good companies. Some are even world class. But imagine if we stepped up our best practices and the vast majority of our listed entities were built on solid corporate governance standards and integrity.

We could be exemplary world leaders!

Thus, there is a real need to build and instil professionalism among all market players, including the senior company management and their boards of directors.

In short, broad, in-depth adherence to corporate governance and a real will to unshackle state ownership of listed company shares are measures Indonesia needs to proactively address and constantly improve on.

That is one way for us to get closer to world-class standards for the Indonesia stock exchange.

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