Jakarta. The Financial Services Authority (OJK) has introduced a new policy allowing publicly listed companies to buy back shares without requiring shareholder approval. The move is aimed at enhancing corporate flexibility in stabilizing stock prices amid increasing market volatility.

“This policy is now in effect. Many companies have applied for buybacks, including through shareholder meetings. Now, they can proceed without needing one,” said Inarno Djajadi, Chief Executive of Capital Market Supervision at OJK, during a press conference in Jakarta on Wednesday.

The announcement follows a trading halt on the Indonesia Stock Exchange (IDX) on Tuesday, after the Jakarta Composite Index (JCI) plunged 5 percent before closing 3.84 percent lower at 6,223.39, its weakest level since September 2021. The market rebounded on Wednesday, with the JCI rising 0.98 percent to 6,284.4 at the end of the first session. 

While companies that have already declared buybacks through shareholder meetings can continue as planned, the OJK set a maximum buyback limit of 20 percent of paid-up capital, with a six-month execution period. “This is similar to policies during the pandemic, but companies must submit reports on implementation,” Inarno said.

The regulator said that oversight would be strict to ensure compliance. “We continuously monitor to ensure buybacks are executed as per regulations. If market conditions improve and issuers decide against a buyback, that’s fine. But if needed, they can proceed immediately,” he added.

The policy has gained support from lawmakers, including Budi Djiwandono, a member of Indonesia’s House of Representatives. “We believe this well-considered measure will strengthen market confidence,” he said.

Foreign investors have been offloading Indonesian equities, but the OJK has yet to engage directly with institutional investors regarding the selloff. The buyback policy, however, is expected to bolster investor confidence in the country’s capital markets.

Net foreign outflows have reached Rp 26.04 trillion ($1.58 billion) year-to-date, including Rp 1.77 trillion in the past week alone, underscoring diminishing confidence in Southeast Asia’s largest economy. The JCI has fallen more than 8 percent year-to-date.

Several major companies, including those in the banking sector, are reportedly preparing to initiate buybacks. “From the information we’ve received, some issuers are ready to conduct buybacks. They will formally notify us beforehand,” said Inarno.

Indonesia Stock Exchange CEO Iman Rachman views the OJK’s decision as a strategy to boost domestic demand, particularly amid ongoing foreign capital outflows. “It’s not about the quantity but about OJK’s effort to create demand. Right now, most foreign investors are exiting, so additional domestic demand is needed,” Iman said during the press conference.

While the effectiveness of the buyback policy hinges on the volume of shares repurchased, Iman remains optimistic. “Buybacks increase demand, but the impact depends on how much is purchased,” he explained.

Despite continued foreign investor net selling, Iman believes buybacks could help improve market sentiment. However, the full impact of the policy will only become evident over time.

He hoped that the initiative would help mitigate investor panic and enhance confidence in Indonesia’s stock market, including among foreign investors.