Danantara Indonesia is not a bailout vehicle, its head of public investment told the Reuters NEXT Asia event on Thursday as the sovereign fund sought to allay investor worries about its role in supporting the battered Indonesian equities market.
Indonesia’s capital markets have been hammered since MSCI in January flagged transparency concerns and warned the stock market could be downgraded to frontier status, prompting a foreign investor exodus.
“Our incentive is to make the capital market stronger and deeper, not just to provide some short-term injection that is not going to be helpful in the long term,” Danantara’s Rani Piputri said at the event in Singapore.
The January warning from MSCI led to a slate of market reform measures from authorities, including doubling the minimum free float for listed companies to 15%. Last month, the index provider extended its review to November.
Piputri said Danantara wants the capital market to be liquid and transparent with strong governance, while noting that the stock exchange was already implementing its reforms.
“Obviously, this is not something that can be done in a couple of months. This requires consistency,” she said.
Jakarta’s main share index is down over 30% this year, making it the world’s worst-performing major stock market.
“We look at Indonesian companies from their fundamental value, a lot of them now are being undervalued because of this broad sentiment,” she added.
Investors have also been worried about President Prabowo Subianto’s populist policies and Danantara’s widening role in the economy.
Piputri said that Danantara will also look to consolidate more than 1,000 state-owned enterprises to 300 “within a couple of years”.
View the live broadcast of the World Stage event and read full coverage of the summit here.
Reuters
