OJK Takes Action to Stimulate Uncertain Market Conditions

The Indonesian Financial Services Authority (“OJK”) recently issued two letters, namely: OJK Circular Letter No. 3/SEOJK.04/2020 dated March 9, 2020 on Additional Conditions Constituting Significantly Fluctuating Market On the Implementation of Shares Buyback of Issuers or Publicly Listed Companies (“OJKCL 3/2020”) and OJK letter No. S-89/D.04/2020 dated March 16, 2020 to provide detail and explanation to the OJKCL 3/2020 (“OJK Letter 89/2020”).

The  OJKCL 3/2020 and OJK Letter 89/2020 are issued to stimulate and to improve the recent unexpected plunge in the global and local market, due to (i) the decline of the Joint Share Price Index (“IHSG”) by 18.46%, and (ii) the recent worldwide outbreak of Coronavirus Disease (“COVID-19”). The expectation from the issuance of OJKCL 3/2020 and OJK Letter 89/2020 is to give more flexibility for Issuers and Publicly Listed Companies (jointly referred as the “Publicly Listed Companies”) in carrying out shares buyback during the current market condition.

  • Conditions on Significantly Fluctuating Market

To refresh, in 2013 OJK issued a rule governing buyback of shares in the event where market conditions significantly fluctuates. OJK Regulation No. 2/POJK.04/2013 on Share Buybacks of Issuers and Publicly Listed Companies in Significantly Fluctuating Market Conditions (“OJK Reg 2/2013”) defines Significantly Fluctuating Market as a condition where: (a) there is a 15% of collective decline to the IHSG for 3 (three) consecutive market days; or (b) additional conditions determined by OJK.

The decline of IHSG by 18.46% and COVID-19 outbreak meets additional fluctuating market condition as referred in  OJK Reg 2/2013. OJKCL 3/2020 determined that the Significantly Fluctuating Market Conditions is effective as of the date of the OJKCL 3/2020 – March 9, 2020 – and shall cease to exist when the OJKCL 3/2020 is revoked.

  • Implementation of Buyback Shares During Significantly Fluctuating Market

With the OJKCL 3/2020 in effect, a Publicly Listed Company which: (i) will buy back; or (ii) are currently carrying out the buyback; or (iii) has possessed its shares (treasury) based on the prevailing regulations in the Capital Market sector; are allowed to carry out buyback of shares under, among others, the following mechanism:

  • such Publicly Listed Company may buy back its shares without the approval of the General Meeting of Shareholders;
  • the maximum number of shares that can be bought back is up to 20% of the paid-up capital, with the condition that at least 7.5% of such Publicly Listed Company continued to be held by public;
  • such Publicly Listed Company may buyback the shares under this mechanism after carrying out disclosure of information to Indonesia’s Stock Exchange (“IDX”) and OJK. This disclosure of information can be carried out at any time until 7 (seven) Market days after the OJKCL 3/2020 is revoked – while the shares buyback itself may be conducted within the period of 3 (three) months after the disclosure of information.


  • Implementation of the Resale of the Purchased Shares Through Buyback (Refloat)

For refloat, the pricing for such resale must be determined by:

  • If the resale of shares purchased through buyback is being carried out via regular market on the IDX, then as stipulated under OJK Reg 2/2013, the price cannot be a lower price than the average price of the buyback, with additional consideration that the price cannot be a lower price than (whichever the highest):
    1. share’s closing price in the regular market 1 (one) day before the resale date; or
    2. closing value of daily trading in the IDX during the last 90 (ninety) days before the resale date.
  • If the resale of shares purchased through buyback is being carried out via negotiation market on the IDX, the price must refer to the following (whichever the highest):
    1. average price of the buyback; or
    2. average price of the closing value of daily trading in the IDX during the last 90 (ninety) days before the resale of the shares.

Furthermore, if the resale of shares purchased through buyback is carried out via the IDX (either through regular market or negotiated market), the obligation to disclose the identity of the recipient of the refloat shares as stipulated by Article 16 paragraph (3) letter a of OJK Reg 2/2013 shall not be applicable, as such requirement only applies to the refloat carried out outside the IDX.

The maximum value of the refloat shares via the continuous auction market in the IDX each day shall not exceed 20% of the total value of the bought back shares. Contrarily, such limitation is not applicable for the refloat shares carried out via the negotiated market.

Further, OJK Letter 89/2020 also provides that the foregoing mechanism may also be applied to the refloat of shares bought back under the other significantly fluctuating market events determined by OJK previously.

  • Indonesian Stock Market Update

Following the issuance of OJKCL 3/2020, there have been many reports on shares buyback initiative by several major Publicly Listed Companies – consisting of banks, construction as well as mining companies. As of March 16, 2020, there are several Publicly Listed Companies which have announced their plan to carry out the shares buyback, amongst other, PT Bank Rakyat Indonesia (Persero) Tbk., PT Bank Negara Indonesia Tbk., PT Bank Pan Indonesia Tbk., PT Kalbe Farma Tbk., etc.


March 19, 2020

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