Jakarta. The government is moving to deepen capital market liquidity by raising the cap on equity investments for insurance companies and pension funds, a policy shift aimed at stabilizing markets amid global volatility and strengthening domestic investor participation.

The limit for stock investments by insurers and pension funds will be raised to 20% from the current 8%, with the initial allocation restricted to blue-chip stocks in the LQ45 index, officials said on Friday.

The policy was a key outcome of a meeting between Chief Economic Affairs MinisterbAirlangga Hartarto and Finance Minister Purbaya Yudhi Sadewa at Wisma Danantara in Jakarta.

“We discussed increasing the investment limit for pension funds and insurance companies in the capital market from 8% to 20%,” Airlangga said, as quoted by state news agency Antara.

Purbaya said the government would pair the higher limit with strict safeguards to protect policyholders and pension beneficiaries. At the initial stage, investments will be allowed only in LQ45 stocks, which represent the most liquid and fundamentally strong companies on the Indonesia Stock Exchange (IDX).

“We will allow up to 20%, but only in stocks that are not subject to price manipulation,” Purbaya said. “For the first phase, we will likely limit placements to LQ45 constituents.”

The finance minister pointed to past episodes in which institutional funds were channeled into small, illiquid stocks, leaving them vulnerable to manipulation and resulting in losses for end investors. He said the government is committed to improving capital market governance to prevent a repeat of those problems.

“I do not want to release insurance funds into a market that is prone to manipulation. That will all be fixed,” Purbaya said.

The technical framework for the policy is expected to be formalized soon through a Finance Ministry regulation.

Beyond raising investment limits, the government is accelerating a set of reforms to strengthen Indonesia’s capital markets. These include plans to increase minimum free float requirements for listed companies to 15% from 7.5% and tighten disclosure and transparency rules to improve investor protection.

Officials said the measures follow a directive from President Prabowo Subianto to shield the domestic market from external shocks, including volatility tied to global benchmark indices such as MSCI, which in recent days triggered heavy selloffs that dragged the Jakarta Composite Index down from around 9,000 to 7,400 in just two sessions.

Market participants welcomed the policy signal, viewing it as a potential source of stable, long-term capital at a time when foreign flows have been volatile. The Jakarta Composite Index rose 1.18% on Friday to close at 8,329.61, while the LQ45 index jumped 2.52% to 833.53, outperforming the broader market.