SINGAPORE – Indonesia’s financial regulator said on March 19 that it would temporarily loosen share buyback rules, following the worst market fall in more than a decade.
On the same day, the nation’s central bank kept its key interest rate unchanged for a second straight month, seeking to safeguard the rupiah.
The currency, Asia’s worst-performing currency so far in 2025, was last down 0.6 per cent at 16,525 per US dollar.
The moves come a day after a stock market meltdown that was fuelled by a combination of domestic factors – from President Prabowo Subianto’s economic policies to a worsening fiscal outlook. A key factor was fear that veteran Minister of Finance Sri Mulyani Indrawati would resign, a rumour she has allayed.
The benchmark Jakarta Composite Index plummeted more than 7 per cent in intraday trading on March 18, the biggest plunge since September 2011. The fall forced the Indonesia Stock Exchange to halt trading for 30 minutes for the first time since the Covid-19 pandemic in 2020.
“We announce that listed companies can do a buyback without the general meeting of shareholders,” Mr Inarno Djajadi, a senior official at the Indonesian Financial Services Authority (FSA), told a news conference. The policy would be valid for the next six months, he said.
He added that easing buyback rules was also expected to give companies the flexibility to react to high market volatility.
The FSA said Indonesia’s stock trading has seen a significant fall since September 2024.
Mr Inarno said the high market volatility was caused partly by the US’ tariff policy, trade wars, and unstable geopolitical developments.
Analysts said the stock plunge indicated growing worries about fiscal policy and the state’s role in the economy under President Prabowo Subianto.
Mr Prabowo has issued several controversial policies since he was sworn in in October 2024, including free meals programmes that put a huge burden on state coffers and massive cuts to government spending, triggering student protests across the country.
An Indonesian state-owned lender scrapped a planned sale of dollar bonds as the stock market rout quickly spread to other asset classes.
Bank Tabungan Negara pulled its offering of five-year dollar-denominated Tier 2 notes which it started marketing on March 18, citing market volatility, according to people familiar with the matter. The bank may revisit the market again at a later stage, the people said.
“It was unfortunate timing for Bank Tabungan Negara to try to issue Tier 2s during a day of massive equity volatility in Indonesia,” said Mr Nicholas Yap, head of Asia credit desk analysts at Nomura Holdings. “While the bank is majority government-owned, its underlying fundamentals are not particularly strong, with weak asset quality and modest profitability.”
The average yield premium on dollar-denominated Indonesian corporate bonds hit around 144 basis points over Treasuries at March 18’s close, the highest level since September 2024, according to Bloomberg data.
They have now widened almost 16 basis points so far in March, under-performing bonds issued by companies elsewhere in South-east Asia.
The stock market showed signs of recovery on March 19, with the benchmark index up 1.5 per cent. But bond traders still appear nervous: The cost to insure Indonesian debt against default widened on March 19, according to a trader.
Last week, Goldman Sachs Group downgraded Indonesian assets, citing rising fiscal risks from a series of initiatives by President Prabowo.
The Wall Street bank lowered its recommendations on 10- to 20-year quasi sovereign bonds to neutral, after they had been among the most-favoured previously. AFP, BLOOMBERG
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