Jakarta. Sovereign wealth fund Danantara revealed Friday that it was open to buying shares in the Indonesia Stock Exchange or IDX as the latter will soon turn into a shareholder-owned entity.

An upcoming demutualization will see the IDX converting from what used to be member-owned into a business belonging to its shareholders. Indonesia is now forging ahead with the IDX demutualization plan after the Jakarta Composite Index (JCI) took a freefall this week. The demutualization is set to take place later this year. The process is also expected to clear the path for the exchange to go public. Danantara Chief Executive Officer Rosan Roeslani admitted that the fund welcomed the upcoming changes in the IDX’s structure.

“We are open to the idea. Once the demutualization happens, of course, we [Danantara] do intend to enter [the IDX],” Rosan told a press briefing in Jakarta.

Rosan did not disclose details of how big the ownership is Danantara eyeing. He signaled that Danantara was considering entering IDX via an initial public offering (IPO). He added: “We will see how it goes.” 

The investment tsar revealed that Indonesia’s state-owned enterprises made up almost 30% of the market cap at the IDX. And so the fund is on board with the idea of turning the IDX into a joint stock company, as it will “boost the capital market’s transparency”, according to Rosan.

Chief economic affairs minister Airlangga Hartarto said that the entry of investors under a demutualized system would make the IDX “more independent” towards its members, including in terms of taking disciplinary actions against those who trigger market distortions.

“The [demutualization] is a structural transformation to minimize the conflict of interest at the exchange between its management and members. It aims to prevent unhealthy market practices. Demutualization opens for investment from Danantara and other agencies,” Airlangga said.

Danantara oversees all of the Indonesian state-run enterprises, some of which are publicly listed at IDX. The list includes the major banks BNI (BBNI); BRI (BBRI); Mandiri (BMRI). The same goes for the telecommunications giant Telkom with the ticker symbol TLKM.

All eyes are now on IDX after its chief Iman Rachman stepped down. Before his resignation, the JCI had tanked after index provider MSCI flagged concerns over trading transparency. MSCI has given Jakarta some time until May to make improvements. MSCI has also warned of a possible downgrade from emerging market to the less established status of frontier market.

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