Indonesia Stock Market Outlook to 2030

Indonesia Stock Market Overview

• The Indonesia stock market volume, valued at USD 1.93 billion, has been experiencing steady growth over the past five years, driven by several key factors. The expansion of digital trading platforms, an increase in retail investor participation, and continuous government efforts to enhance capital market infrastructure have all contributed to this upward trajectory. Additionally, Indonesias economic growth, supported by strong domestic consumption and increasing foreign direct investment (FDI), continues to bolster the stock market's performance.

• The dominant cities influencing the stock market are Jakarta and Surabaya, with Jakarta standing out as the financial hub of the country. Jakarta's dominance is due to its role as the home of the Indonesia Stock Exchange (IDX), housing the headquarters of major listed companies, and being a key center for corporate governance, financial services, and market regulations. Surabaya, Indonesia's second-largest city, also plays a significant role due to its rapidly growing economic base, attracting significant investor interest.
• The Indonesia Stock Exchange (IDX) operates under a strict regulatory framework overseen by the Financial Services Authority (OJK). As of 2023, the IDX has updated its compliance rules for listed companies, requiring detailed quarterly financial disclosures to ensure transparency and investor protection. These regulatory measures aim to enhance market stability and reduce fraudulent activities, improving investor confidence in the stock market

Indonesia Stock Market Segmentation

By Market Segment: Indonesia's stock market can be divided into the main board and the development board. The main board dominates the market, primarily because it consists of large, established companies with significant trading volumes. These companies tend to have better liquidity, making them attractive to institutional and retail investors alike. The presence of major Indonesian corporations such as PT Bank Central Asia and PT Astra International contributes to this segments strength.

By Investor Type: In terms of investor type, the market is primarily split between retail and institutional investors. Retail investors have increasingly dominated the market over recent years due to the rise of mobile trading platforms, allowing easier access to the stock market. The accessibility of online trading, combined with growing financial literacy among the Indonesian population, has empowered retail investors to play a more prominent role in market activities.

Indonesia Stock Market Competitive Landscape

The Indonesian stock market is dominated by a few major players, including both domestic and global companies. Key players include PT Bank Central Asia Tbk, PT Astra International Tbk, and PT Telekomunikasi Indonesia Tbk. These companies have a strong foothold in the market due to their large-scale operations, robust financials, and strategic positioning across various sectors of the Indonesian economy. Their dominance is supported by a combination of strong local presence and adherence to stringent corporate governance practices, which attract institutional investors.

Indonesia Stock Industry Analysis

Growth Drivers

Increase in Retail Investors: The number of retail investors in Indonesias stock market has surged, reaching over 11 million by mid-2024, according to Indonesia's Central Securities Depository (KSEI). The rise is fueled by a younger population, with over 70% of new investors under 30 years old. The rapid digitalization of financial services and social medias influence on financial literacy has also contributed to this growth. Government efforts, such as tax incentives for retail investors, have further encouraged participation. This rise supports broader financial inclusion in the countrys growing middle class.

Government Economic Policies: Indonesia's government has introduced capital market incentives, such as tax reliefs on stock transactions and lower listing fees for small and medium-sized enterprises (SMEs) on the Indonesia Stock Exchange (IDX). These policies are aimed at encouraging more listings and increasing stock market liquidity. As part of its broader economic reform efforts, the government reduced corporate tax from 22% to 20% in 2022 to attract more companies to the stock market. This aligns with broader government initiatives to stimulate economic growth, contributing to the capital markets expansion.

Technological Innovations: Online trading platforms have revolutionized access to the Indonesia Stock Exchange, with over 90% of stock market transactions now happening through digital channels as of 2024. The adoption of mobile trading applications like Ajaib and Stockbit has democratized access to the stock market, especially among millennials and Gen Z. The fintech industry is also actively supporting these platforms by offering integrated services, allowing users to trade seamlessly. The ease of access to trading has resulted in the doubling of active retail investor accounts since 2020.

Market Challenges

Currency Volatility: Indonesias stock market has been subject to periodic volatility due to fluctuations in the rupiah (IDR). In 2023, the IDR depreciated by around 8% against the US dollar, triggered by global inflationary pressures and rising interest rates in developed economies. This has caused foreign investors to pull back from Indonesian equities temporarily. The currency volatility poses a challenge for both foreign and domestic investors, impacting market confidence and reducing capital inflows during periods of instability.

Geopolitical Risks: Indonesia's stock market is sensitive to regional geopolitical risks, particularly concerning trade tensions between the U.S. and China. As China is one of Indonesia's major trading partners, any disruptions can have spillover effects on investor sentiment in Indonesia. Additionally, political uncertainties in Southeast Asia, including disputes over the South China Sea, pose indirect risks to market stability. This has led to heightened volatility in 2023, with the Jakarta Composite Index experiencing several sharp declines.

Indonesia Stock Market Future Outlook

Over the next five years, the Indonesia stock market is expected to exhibit steady growth, fueled by an expanding middle class, rising household incomes, and continued government support for capital market development. The ongoing digitalization of financial services and the proliferation of online trading platforms will further increase retail investor participation. Moreover, foreign investors are expected to continue showing strong interest, driven by Indonesias macroeconomic stability and positive growth projections for its key industries, such as technology, infrastructure, and consumer goods.

Opportunities

Rise of ESG Investing: Indonesia has seen an increase in demand for ESG-compliant investments, with assets in ESG-focused mutual funds reaching IDR 30 trillion by mid-2024. Institutional investors, both domestic and foreign, are increasingly focusing on sustainable investment opportunities. Government regulations, including a 2022 mandate for listed companies to disclose their sustainability practices, have been pivotal in shaping this trend. This presents a significant growth opportunity for companies focusing on sustainability to attract long-term capital.

Financial Inclusion and Digital Expansion: The digital expansion of financial services, especially through mobile trading apps, has brought millions of previously unbanked Indonesians into the financial system. By mid-2024, over 60 million Indonesians had access to some form of digital financial services, representing a massive opportunity for stock market growth. Government-backed initiatives aimed at expanding digital financial literacy and infrastructure are also supporting this trend, providing new pathways for stock market participation from untapped demographics.