Indonesia’s dual-class shares move set to drive equities pickup

The new regulation is likely to spur local listings and, consequently, institutional investor interest in equities, experts say.
Indonesia’s dual-class shares move set to drive equities pickup

Indonesia’s plans to allow dual-class listings are likely to be successful in courting local technology companies while giving equities a boost in Indonesian asset owners’ portfolios, according to experts.

This move by Indonesia to strengthen its stock market is coming about while neighbours Singapore and Hong Kong finalise frameworks to allow special purpose acquisition company (Spac) listings on their bourse.

“This phenomenon will certainly impact Indonesian institutional investors’ allocation to local equities. It is probably going to boost the growth of that asset class,” said Mercer’s wealth business leader for Asia Janet Li, who thinks the new regulation will be a game changer.

The new dual-class shares regulation, currently under review by Indonesia’s Financial Services Authority (OJK), makes it more appealing for founders to list on the IDX by allowing the listing of shares with different voting rights. This enables them to retain control of their companies post-listing, even if they lose their majority shareholding. Google and Facebook are among the global tech companies that have listed dual-class shares, which the New York Stock Exchange has allowed since the 1980s, and Hong Kong and Singapore permitted in 2018.

Harold Ong, Indies Capital


A recent report found Indonesian pension funds’ allocation to equities stands at around 15% and has been decreasing over time, as investors seek safety and yield in fixed income.

A lack of interesting investment opportunities in the local equities market is also to blame, according to Harold Ong, partner at Indonesia-focused alternative investment manager Indies Capital.

“If you look at the index inclusion of new economy in the Indonesian Stock Exchange (IDX), it's very, very small. Local investors don't have the optionality to play in that market, so they end up loading up on fixed income,” he said.

Ong also highlighted Indonesia’s falling weight in the MSCI Emerging Market Index. As of 2020, the market-capitalisation weight of Indonesia was 1.47%, although its gross domestic product accounted for 5.06%.

“It is underrepresented relative to its GDP size because it doesn't have enough interesting companies that are listed,” Ong added.

That is now changing, he said, as local authorities become more supportive of new economy companies.

“Like on Wall Street, where technology company shares rule the market, we see the same thing possibly happening in Indonesia in the near future,” Li told AsianInvestor

Pandu Patria Sjahrir, IDX

Firms who wish to issue dual-class shares on IDX must meet certain criteria, such as a minimum asset size and compound annual growth rate, according to the draft regulation.

Indies Capital Partners co-managing partner and IDX commissioner Pandu Patria Sjahrir said there was no expected date for its approval but that stakeholders were keen to get it done “as soon as possible.”


Indies is an early investor in Bukalapak, the first Indonesian unicorn (company valued at over $1 billion) to list on IDX. Others include Singapore’s GIC, Microsoft, and Jack Ma’s Ant Group.

YC Ng, AC Ventures

The success of Bukalapak’s $1.5 billion-oversubscribed IPO in August – while not motivated by the new dual-class rules, since its co-founders stepped down from their roles in 2020 – is another factor likely to sway other companies to join the fray, according to Ong.

Indonesian firms said to be eyeing a local listing include GoTo, the $18 billion entity formed from the merger between ride-hailing platform Gojek and e-commerce player Tokopedia. The firm is said to be planning a dual listing in New York and Jakarta.

Private investors also stand to gain from the new rules through greater certainty around exits, and more options when it comes to listings. “Three years ago, the decision-making tree was: Do I list the company in the US, or do I list it in the US? Or somebody hopefully buys me out one day,” said Ong.

Indonesian conglomerate MNC Group recently abandoned plans to merge its subsidiary Asia Vision Network with a US-listed Spac and said it was now eyeing a local listing in light of the “increasing enthusiasm of investors in the IDX for companies engaged in digital.”

According to Sjahrir, companies have so far raised close to $7.7 billion in primary issuances or IPOs on the local stock exchange this year. He expects another one or two billion dollar-plus IPOs within the year to bring that number to up to $10 billion.

“I think the market is now starting to realise Indonesia is not a bad place to put capital, especially on the equity side,” he told AsianInvestor.

On whether the new listings will also promote increased allocation by local asset owners to venture capital funds, Mercer’s Li believes it a very logical evolution, although Indonesian venture capital firm AC Ventures partner YC Ng thinks it may take some time.

“Most institutional investors predominantly operate within the public markets – where liquidity is – so by mandate will not be able to do pre-IPO private deals unless they are part of public rounds,” he said. “As the market matures, this should be expected to grow with time.”

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