JAKARTA. Indonesia Stock Exchange (IDX) finally restored symmetrical automatic price limit rejection or auto rejection. The decision is stipulated under the Decree of the Board of IDX Directors concerning the Stock Exchange Rule Number II-A on the Equity Securities Trading.
This decision will take effect on 3 January 2017. "The OJK (Financial Service Authority or FSA) and IDX assessed that the market conditions have returned to normal so that the auto rejection restored to the initial system," said Nicky Hogan, Director of Development of the IDX, Wednesday (14/12).
As information, since August 2015 IDX pegged the asymmetrical auto rejection to dampen market volatility. In this case, IDX enacted asymmetrical auto rejection with an equal lower bound in each fraction of the price, which was 10%.
At that time, the stock market is overwhelmed with negative sentiment from global markets. BEI also had to apply asymmetrical auto rejection when the 2008 financial crisis took place.
Analyst at First Asia Capital David Sutyanto said that the auto rejection under the level of 10% was effective to hold the decline of JCI (Jakarta Composite Index) when the index was overwhelmed by negative sentiment. But, the stock market became incondusive. "The ruling was made due to the special conditions. Now the market has recovered so that the the trade should be restored," said David.
Head of Research at Universal Broker Indonesia Satrio Utomo expressed positive response toward the new policy. Satrio said, to date the good will of the IDX to maintain the shares prices to not plunge at more than 10% has been misused to conduct stock cornering. “Lately, I found many people were eager to conduct stock cornering, as they believed that the stock prices will not fall by more than 10%," he said.
Indeed, the market will become more fluctuative after the auto rejection is restored. However, Satrio said that volatility is part of capital market trading that must be accepted as a risk for the investors. "Stock trading will become more interesting if auto rejection of the lower bound is restores," he said. Investors will also select the stocks with considering the fundamentals of the issuers.
David also said that the current stock market conditions are much more favorable. David is also optimistic that the JCI will still grow in the next year following the rising of economic growth.
Satrio predicted that the transactions in the capital market will be more vibrant in the next year. Let alone, IDX will apply auto rejection of the lower bound.
(Muhammad Farid/Translator)
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