World’s Worst Performing Market Slashes Minimum Stock Price

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Indonesia has reduced the minimum price at which shares can be traded, a move expected to see the shares of dozens of companies in Southeast Asia’s largest economy fall to a tiny fraction of a cent.

The floor price of a share on the Indonesian stock exchange fell from Rp 50 – less than a third of a US cent – to Rp 1 on Monday. The move is part of efforts to promote liquidity and price discovery in the world’s worst-performing stock market, as Jakarta seeks to avoid a downgrade by global index provider MSCI.

Indonesia, whose benchmark stock index has lost more than a quarter of its value this year, already has 291 stocks valued at less than a US cent, second only to the United States.

This year’s stock slide was triggered by a downgrade warning from MSCI in January due to a lack of transparency on shareholding structures and concerns about stock price manipulation.

Broader concerns over President Prabowo Subianto’s economic and fiscal policies have further worsened investor sentiment. With MSCI due to make a final decision in November and Indonesia keen to avoid further capital outflows, Jakarta has sought to restructure its stock market.

The new rules could foster more positive sentiment “by allowing distressed stocks to trade at levels that better reflect their fundamentals,” said Ernest Chew, head of Asia equities at BNP Paribas Asset Management, while adding that stock volatility could also increase.

Homin Lee, senior macro strategist at Lombard Odier, said: “Sentiment has deteriorated significantly in the market.”

Shares of GoTo, which provides ride-hailing and food delivery services and has become emblematic of the Indonesian market’s fall from grace, fell 14 percent to 43 rupees on Monday. It had been stuck at the floor price of Rp 50 for several months.

One of Indonesia’s most successful startups, GoTo went public with great fanfare in 2022, with an initial price of Rp 338 per share and a market capitalization of $28 billion. Its stock price has been hit hard as fierce competition in its core ride-hailing business has squeezed its margins and profitability.

GoTo was removed from MSCI indexes this year because the price floor made the stock difficult to trade.

Besides GoTo, MSCI also removed half a dozen companies linked to Indonesia’s richest tycoons as part of removing the country’s stocks from its global indexes.

Lombard Odier’s Lee said Indonesian regulators and the stock exchange had made concerted efforts to restore confidence. “I think the likelihood of a frontier market rating downgrade is quite low. It’s not zero but it is low,” he said.

Any improvement in market liquidity resulting from the new rule would likely be modest and largely one-off, said Gary Tan, emerging markets portfolio manager at Allspring Global Investments.

“GoTo will see interest from both passive and active international investors. The rest are mostly distressed or highly illiquid companies with limited appeal to international investors,” Tan said.

The Indonesian stock exchange did not immediately respond to a request for comment.

Data visualization by Haohsiang Ko