JAKARTA -- Indonesian President Joko Widodo on Tuesday urged companies to take advantage of the rally in emerging-market assets and raise capital in the domestic stock market.
In its first trading session in more than a week, after a long national holiday, the Jakarta Composite Index rose 1.4% on Monday to a fresh all-time high of 5,910.237. The gain signals that Indonesia is seen as "a good prospect for investment," Widodo told financial industry executives during a visit to the stock exchange in Jakarta even though the JCI fell 0.8% on Tuesday.
Emerging-market stocks have benefited from receding expectations that the U.S. Federal Reserve will rush to raise interest rates. The MSCI Emerging Market Index rose 17% for the first six months of this year, while the JCI gained 12% during the same period.
U.S. credit ratings agency S&P Global in May upgraded Indonesia to investment-grade status, boosting investor sentiment. "Strong capital inflows have allowed the central bank to increase its [foreign exchange] reserves to all-time highs, which should provide some cushion in the event of future external shocks," Goldman Sachs said of Indonesia in a research report on Monday.
Widodo wants to take advantage of the inflows and promote the domestic stock market. At around $480 billion, the market's total capitalization is less than half gross domestic product, according to the World Bank. For neighbors Thailand, Malaysia and Singapore, the ratios are all over 100%.
Many Indonesian companies have listed their shares in more liquid markets, such as Singapore and Hong Kong, which also allow them to raise capital in less volatile currencies. Indonesian conglomerate Sinar Mas Group, for example, runs a major palm oil company listed in Singapore, although it also has companies listed at home.
Widodo said he is "somewhat disappointed" that Indonesian companies would choose to release their shares in the capital markets of other countries. Claiming to have lists of such businesses, he said he would "call them one by one" and invite them to list in Indonesia.
Many of the companies operate in the mining and oil sectors, the president said.
Widodo is looking for ways to repatriate more Indonesian capital, as he pushes an infrastructure development plan that will require more than $400 billion in investment during his five-year term. In 2016, the government launched a tax amnesty program that enabled citizens and companies to declare previously hidden assets parked inside or outside the country for a small penalty. On Tuesday, Widodo also encouraged subsidiaries of state-owned companies to go public.
Muliaman Hadad, chairman of Indonesia's Financial Services Authority, told reporters afterward that the regulator is thinking about amending its listing rules to make stock offerings in Indonesia more attractive. The drive to spur fund-raising on the stock market also comes at a time when a rise in nonperforming loans is raising concern among financial authorities.
One lingering concern among investors is the recent controversy surrounding former Jakarta Gov. Basuki Tjahaja Purnama, a Widodo ally who was sentenced to jail in May for blasphemy against Islam. When it comes to gauging the political winds, next summer's Java regional elections will be "a key event ahead of the presidential elections in April 2019," Goldman Sachs said.