The Financial Services Authority, known locally as the OJK, announced on Wednesday that it had terminated its policies that relaxed requirements for listed companies to conduct a share buyback in improved economic conditions.
The OJK had allowed listed companies to buy shares back from investors without approval from shareholders should the market fluctuate significantly.
In its statement, the OJK said the withdrawal was announced after “several market indicators show that the Indonesia Stock Exchange [IDX] is no longer under pressure and was not experiencing significant fluctuation.”
“Furthermore, the regional and national economic condition points to growth and more positive development trends,” the OJK said in the statement.
The OJK eased the buyback requirements last year after the Jakarta Composite Index fell 23.91 percent in the space of three months. The JCI has clawed back 16.79 percent since the start of this year.
Several listed companies exercised buyback options during the volatile period including Global Mediacom, a holding company for three national free-to-air television networks, which paid Rp 185 billion ($416 million) to purchase 421 million of its shares from the public.
The JCI closed at 4,991.64 on Wednesday, just shy of the 5,000 barrier. The market was closed on Thursday for Vesak, a Buddhist holiday.
Investors have been in a positive mood in 2014 thanks to a narrowing current-account deficit and slowing inflation.
A peaceful general election has also worked to attract investors.
Ito Warsito, the president director of the IDX, said foreign investors were becoming more confident about Indonesia’s stock market.
“Those entering the stock market are mostly buy-and-hold investors. They are investing in the long term,” he said.
The numbers bear that out, with foreign investors having bought Rp 36.1 trillion more stocks than they sold so far this year, according to statistics from the IDX.
Nurhaida, an OJK commissioner, said that Indonesia needed more companies listing their shares on the local bourse in order to make the stock market more liquid and attract even more funds from foreign investors.
“We are trailing our Southeast Asian neighbors. Malaysia, for example, has approximately 1,000 listed companies, Singapore has more than 760, while Thailand has 500,” Nurhaida said.
Indonesia has just 498 firms listed on the local bourse, she added.
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