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The Indonesian Stock Exchange (IDX) has implemented new policies to support the markets and capital raisings during the COVID-19 outbreak.
IDX has relaxed rules on:
The exchange has also extended deadlines for annual and financial reporting obligations of listed companies.
Indonesia’s Financial Services Authority (OJK) has also revised policies in March 2020 in response to the outbreak, with changes covering:
OJK’s Letter No. S-101/D.04/2020, issued on 24 March 2020, contained several important policy changes.
Extension of validity of financial statements and valuation report
The period permitted between the audited financial statement (and the cut-off date for a valuation report) used for public offerings and the OJK’s declaration of effectiveness of the registration statement has been extended as follows:
Previously, OJK’s effective statement for a public offering had to be obtained within six months of the date of the financial statements being used as a basis for the offering.
The public offering prospectus is however required to disclose the proforma financial highlights of the issuer between the date of the audited financial statements used for the public offering and more recent financial information prior to OJK’s effective date.
We note that this extension also applies to material transactions, affiliated party transactions and conflict-of-interest transactions.
Extension of book-building period in public offerings
Issuers in a public offering can now submit confirmation of the number of shares, offer price and interest rate for bonds up to two months after the announcement of the abridged prospectus and/or the issuance of OJK’s pre-effective statement.
Prior to the issuance of the OJK Letter, confirmation of the offering structure had to be submitted to OJK within seven to 21 working days (ie, up to one month) after the announcement of the abridged prospectus and/or issuance of OJK’s pre-effective statement.
Recent market conditions declared an event with a significant impact on issuer’s business
Under the existing rules (OJK Regulation IX.A.2), once OJK has issued the effective statement, a public offering can only be postponed or cancelled for one of the following three reasons:
In the OJK Letter, two circumstances are recognised as meeting the conditions for point (c) to now apply as a basis for postponing or cancelling a public offering:
The OJK Letter also sets out the procedure for issuers to recommence the public offering period.
The provisions of the OJK Letter will remain valid until determined otherwise by the OJK.
IDX has issued new equity-type securities trading rules through Decision Letter No. Kep-00025/BEI/03-2020 dated 12 March 2020 (Rule II-A 2020). The main changes introduced by this regulation are as follows:
The IDX has also removed all shares from the pre-opening trading session, meaning that shares can no longer be traded in the pre-opening session until further notice.
The IDX securities trading system will now automatically reject a sale offer and/or purchase order for equity-type securities in the regular IDX market if:
The IDX announced a general prohibition on short-selling transactions on the IDX on 2 March. This prohibition was implemented through the following measures:
As background, IDX Regulation No. II-H on Securities Trading and Requirements for Margin and Short-Selling Transactions provides that short-selling transactions can only be conducted on certain securities as determined by the IDX through a list of securities published by the IDX on a regular basis.
This prohibition is in effect until further notice.
In parallel with OJK’s deadline extensions for annual financial statements filing, the IDX issued a similar policy on 20 March through Decision Letter No. Kep-00027/BEI/03-2020.
The deadlines for listed companies to submit their annual reports, annual financial statements and interim financial statements as of 31 March 2020 have all been extended by two months:
These extensions are in effect until further notice.
The IDX amended the guidelines on trading during an emergency through Decision Letter No. Kep-00024/BEI/03-2020 on 10 March 2020.
Under the new guidelines, in case of panic selling on the market that causes the composite IDX index to plummet in a single trading day, the IDX may take the following actions:
Condition |
IDX Action |
---|---|
Composite IDX index declines by more than 5% |
Halt trading for 30 minutes |
Composite IDX index declines by more than 10% |
Halt trading for 30 minutes |
Composite IDX index declines by more than 15% |
Suspend trading, either until the end of the trading session or for more than one trading session if so ordered or approved by OJK |
The IDX issued Decision Letter No. Kep-00031/BEI/03-2020 on March 26th, temporarily shortening the trading session hours for share transactions on the cash, regular and negotiated markets. The new trading session hours are as follows:
Trading Session |
IDX Market |
New Trading Hours |
Previous Trading Hours |
---|---|---|---|
1st session | Regular, Cash, and Negotiated |
Monday to Friday: |
Monday to Thursday: Friday: |
2nd session | Regular |
Monday to Friday: |
Monday to Thursday: Friday |
Negotiated |
Monday to Friday: |
Monday to Thursday Friday: |
|
Pre-Closing Session | Regular |
Monday to Friday: |
Monday to Friday: |
Post-Closing Session | Regular |
Monday to Friday: |
Monday to Friday: |
These new trading session hours are in effect until further notice.
The new OJK and IDX policies reflect the concerns of the two main regulatory bodies overseeing Indonesian listed companies and capital markets over the challenges caused by the COVID-19 pandemic for public companies, prospective public companies and market disruptions.
Extending the validity period of financial statements and the book-building period for public offerings is intended to encourage potential issuers not to abandon their proposed public offerings despite slowing market conditions. Extending the deadlines for reporting obligations gives public companies more time to comply with their obligations.
We will continue to keep you updated on further regulatory and policy developments relevant to Indonesian issuers and capital markets.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2024
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