Indonesia’s Stock Market: The Most Liquid Illusion You'll Ever Try to Trade
The IHSG is rising, but only a handful of stocks carry the index. Here's why Indonesia’s market may look open, but isn’t built for serious capital.
Indonesia’s benchmark stock index, the IHSG, is up 11.6% year-to-date, nearly neck-and-neck with those sharp-suited Singaporeans next door who pride themselves on order, efficiency, and actual liquidity. Even more impressively, Jakarta’s market is outrunning Japan, China, and just about every other regional neighbor, including the Philippines, Malaysia, and Thailand, each of whom seem stuck in a competition to see who can disappoint foreign investors most consistently.
The only outliers are Vietnam and South Korea, who appear to have accidentally built stock markets that people want to buy. Vietnam’s up 28.7%, Korea’s pushing 34.4%.
Glance at Bloomberg’s “Asian Benchmark Indices” and you’d be forgiven for thinking Indonesia is not just investable, but practically surging. It’s only when you stop looking at the chart and start trying to place an order that the illusion breaks. Because while you can technically buy Indonesian stocks, actually getting scale, execution, or a way out without moving the market is something else entirely.
So yes, the index is up. But that’s not the same as the market being open for business.
Free Float: It's Called “Free” But Try Touching It
Indonesia has helpfully reimagined the phrase “publicly traded” into something more aspirational than functional. Under IDX rules, companies are required to float just 7.5% of their shares, and only 50 million of them need to be in public hands. By global standards, that’s barely a float.
India demands 25%.
Tokyo insists on 35% if you want to join its grown-up Prime board.
These markets assume investors might want to, well, invest. Indonesia assumes they’ll be satisfied watching.
And even that 7.5% often comes with conditions. A good chunk of these “public” shares tend to be quietly held by friendly institutions, former classmates, second cousins, and whoever helped the founder’s kid get into university. They technically qualify under the rules because they hold less than 5%, but these holders are about as liquid as a block of concrete.
Then there are IPO lock-ups. Most Indonesian IPOs feature 8-month lock-ups for pre-listing shareholders, meaning you get a float that you can see but can’t touch. The moment a company lists, its tradable supply often retreats behind an invisible velvet rope.
This means the actual, actionable float often rounds down to nearly nothing.
For big-ticket investors trying to deploy serious capital, Indonesia can feel like a market that's somewhere between theoretical and ceremonial. Yes, it’s technically free float. But in practice, you’re trading with ghosts. And the ghosts aren’t selling.
Five Stocks and a Dream: Welcome to the IHSG
The IHSG, Indonesia’s main stock index, is technically a composite. It includes nearly every stock on the exchange. But don’t let that word “composite” fool you into imagining some diversified expression of economic dynamism. In practice, it reflects the performance of a few very large ones and a long tail of names that could vanish tomorrow without disturbing the chart.
Out of the hundreds of names technically in the index, about five or six do all the heavy lifting. These include the usual suspects: BCA, BRI, Mandiri, Telkom, Astra, and whichever commodity darling is having a good quarter. The rest of the board? Decorative. Their main utility is to pad out slide decks and help first-year analysts feel like they’re doing real coverage.
The result is an index so top-heavy that if one of the big banks so much as coughs, the IHSG jumps 30 points and someone at a trading desk calls it a breakout. The illusion of movement comes from a very concentrated few, while the vast majority of stocks remain in a state of stillness.
If you’re a serious institutional investor with capital to deploy, the menu is short. You can buy BCA, or, if you’re feeling wild, maybe Telkom. After that, your options dry up fast unless you enjoy trading in Full Call Auction names that trade twice a day in scheduled auctions.
Liquidity in these names is a matter of shared faith. You place your order. You wait. Sometimes it fills. Sometimes it doesn’t.
So yes, the IHSG includes everyone. However, what's marketed as a broad-based market index, behaves more like a narrow ETF with a few crowded holdings and a bloated appendix of illiquids no one asked for.
Why List If No One Can Buy? (Tax and Optics, Mostly)
A lot of Indonesian companies do, in fact, go public. It’s just that public participation is rarely the point. The goal isn’t to welcome investors, it’s to complete a wholesome, deeply investor-friendly checklist.
Listed share sales are taxed at a flat 0.1% on gross proceeds, regardless of gain. Compare that to off-market share sales, which come with more complex and far more expensive tax treatment. Listing is a gateway to monetisation without penalty.
Banks love a ticker. Being listed helps secure loans and lower borrowing costs, regardless of trading frequency.
A listed company can issue ESOPs, acquire targets using shares, or claim a public valuation that exists on paper even when the market itself isn’t functional. It’s the best of both worlds: private control with a public label.
Floating 40% of shares even opens the door to a 3% corporate tax cut. Almost no one does it, of course, but it’s nice to have on the slide deck.
And of course, State-Owned Enterprises (SOEs) love listing subsidiaries for “transparency” and “performance.” Which, in Indonesia, means letting the public watch closely as nothing ever actually changes.
So yes, companies list. But they often do it for reasons that have little to do with you, the investor. You are not the customer in this transaction. You are a prop in the performance of capital markets legitimacy.
“But the Market's Up!” Said Every Misled Chart Watcher
At first glance, Indonesia’s 11.6% YTD gain looks impressive. It leaves Malaysia (-4.0%), Thailand (-10.1%), and the Philippines (-3.3%) trying to remember where they left their equity flows. On Bloomberg, Indonesia’s market looks alive and well. But not everything that glitters is liquid.
The truth is, that 11.6% is powered almost entirely by the same five to six stocks we keep mentioning. The IHSG is a cap-weighted index, and in cap-weighted indices, they don’t care if 90% of listed companies are untradeable, irrelevant, or locked in some regulatory purgatory. As long as the giants are moving, the chart moves with them.
If you’re buying Indonesia hoping for broad-based performance, you’re essentially choosing between BCA, Mandiri, or Telkom. Maybe a little Astra on the side if you're feeling adventurous. Everyone else? Along for the ride, assuming they trade at all.
Meanwhile, Vietnam’s up nearly 29% because it’s building infrastructure, reforming trading systems, and gunning for index reclassification.
South Korea, is up 34% driven by a blend of AI-chip demand, governance pushes, and actual capital formation.
Indonesia’s rally, such as it is, has leaned heavily on:
Temporary regulatory loosening around buybacks,
Some currency stabilization efforts by Bank Indonesia
A 5.1% GDP print, which is solid but not hardly transformative.
In short, yes, the IHSG is up. But before you get excited, ask yourself: is the market rising because it’s investable, or because the same five stocks were in a good mood?
Indonesia’s equity market gives off all the right signals at first glance. It has an exchange, an index with strong YTD performance, hundreds of listed companies, and a steady flow of IPOs. On paper, it’s a market. In practice, it’s more of a showroom.
It’s not that you can’t buy Indonesian stocks. You absolutely can. What you can’t do (at least, not easily) is scale, across sectors, with reliable execution and exit options, Or build a position without meeting half the board of directors.
For large-scale foreign capital, Indonesia is a qualified maybe. It’s open, but barely. It's liquid, if you're patient and your definition of liquid is flexible. And it's transparent, provided you’re not curious about anything material.
Until reforms around free float, short selling, market depth, and governance move into actual practice, Indonesia will remain what it has long been: a market that looks better on Bloomberg than it trades in real life.
So yes, you can technically buy Indonesia. Just don’t expect to actually own it in any meaningful sense. Not yet.
At StratEx - Indonesia Business Advisory we help investors and operators cut through the noise. Contact us if you're interested in aligning boards, talent, and incentives with what's really going on beneath the surface.