Comprehensive Guide to Capital Markets in Indonesia

Overview of Capital Markets

Indonesia's capital markets are regulated by the Financial Services Authority (OJK - Otoritas Jasa Keuangan) and are essential for raising funds, investing, and trading securities. The market includes the stock exchange (IDX - Indonesia Stock Exchange), bonds, mutual funds, and other financial instruments.

Key Regulations

1. Financial Services Authority (OJK): The primary regulatory body overseeing capital markets, ensuring investor protection, and maintaining market integrity.
2. Company Law (Law No. 40 of 2007): Governs the establishment and operation of companies, including public offerings.
3. Capital Market Law (Law No. 8 of 1995): Regulates securities offerings, trading, and the responsibilities of market participants.
4. Regulations on Public Offerings: Companies must comply with OJK regulations when conducting initial public offerings (IPOs), including disclosure requirements and prospectus submission.

Costs Associated with Investing

1. Brokerage Fees: Typically range from 0.1% to 0.3% of the transaction value for buying and selling stocks.
2. Transaction Tax: A tax of 0.1% on the sale of shares and 0.01% on bond transactions.
3. Custodian Fees: Charged by custodians for holding securities, usually around 0.1% to 0.2% of the asset value annually.
4. Regulatory Fees: Fees for registration and compliance with OJK, which vary based on the type of securities and the size of the offering.

Standard Procedures for Participation

1. Opening a Securities Account:

   • Choose a licensed brokerage firm.
   • Provide necessary documentation (ID, tax identification number, proof of address).
   • Complete the account opening form and sign agreements.

2. Investing in Stocks:

   • Fund your securities account.
   • Use the brokerage platform to place buy/sell orders.
   • Monitor investments through the brokerage’s reporting tools.

3. Participating in IPOs:

   • Research upcoming IPOs via the IDX or OJK announcements.
   • Submit applications through your brokerage during the offering period.
   • Allocate funds for the purchase of shares.

4. Investing in Bonds and Mutual Funds:

   • Bonds can be purchased through brokers or directly from issuers during offerings.
   • Mutual funds are available through asset management companies; choose based on investment goals and risk tolerance.

Country-Specific Considerations

1. Market Hours: The IDX operates from 9:00 AM to 4:00 PM (WIB) on weekdays, with a break from 12:00 PM to 1:30 PM.
2. Currency Risk: Investments are typically denominated in Indonesian Rupiah (IDR), which may be subject to volatility against other currencies.
3. Foreign Investment Restrictions: Certain sectors have limits on foreign ownership; check OJK regulations for specifics.
4. Taxation: Capital gains tax on stock sales is generally 10% for individuals and 15% for corporations. Dividends are subject to a withholding tax of 10%.
5. Cultural Considerations: Understanding local business practices and building relationships can be crucial for success in the Indonesian market.

Conclusion

Investing in Indonesia's capital markets offers opportunities but requires understanding the regulatory environment, associated costs, and market dynamics. Familiarity with local practices and compliance with OJK regulations is essential for successful participation.