Stock Market Reform: Between a Cure for “Stock Speculation” and Conglomerate Stock “Acrobatics”

By Eko B. Supriyanto, Editor-in-Chief of Infobank Media Group

FULL of optimism. The stock market rebounded, foreign capital flowed in, and the rupiah strengthened. The market seems to have swallowed a “Viagra pill.” Data as of February 12, 2026, shows the Composite Stock Price Index (IHSG) at 8,265 and the rupiah at Rp16,818 per US dollar. On the surface, these figures look like a victory song.

However, don’t be lulled by the apparent movement of the index. As the general public or retail investors who struggle daily with trading screens and financial reports, let’s be honest that the Indonesian capital market still has chronic structural problems. What are they? There is the dominance of conglomerate stocks that are deeply rooted.

Last week, the authorities announced a series of reforms. These range from an increase in free float from 7.5 percent to 15 percent, transparency of Ultimate Beneficial Owners (UBOs), disclosure of shareholders above 1 percent, to an increase in the stock investment limit by pension funds and insurance companies from 8 percent to 20 percent specifically for LQ45 stocks.

The question is, is this enough to change the face of the capital market, which is still a “cash cow” for tycoons? According to a limited discussion by the Infobank Institute, there are at least some concerns that need to be addressed.

First, the policy of increasing the free float from 7.5 percent to 15 percent sounds progressive. The goal is noble, namely to increase liquidity. But let’s look at the reality. Large conglomerate stocks often only release a small portion to the public. Many of the shares owned by conglomerates have price-earnings ratios (PER) in the hundreds of percent, like “acrobats” with irrational prices. Meanwhile, control remains within the family or business group. With this increase, they may “distribute” some old shares to the public. However, they will not relinquish management control.

On the other hand, experience shows that retail investors need more than just illusory liquidity. Retail investors need, at the very least, a fair market. When a conglomerate, for example, owns a coal mining business and then “sells” its coal to another company within the same group at a low price, the company’s recorded profits plummet. Who loses out? Retail investors. Who benefits? The conglomerate owner through transfer pricing in his other companies.

Second, the issue of transparency regarding UBOs and shareholders above 1 percent is a revolutionary step on paper. It is like lifting the veil on who is behind the shell companies that are often used to manipulate the market.

However, we must remember past experiences. In this country, rules are often made, but their execution stalls due to conflicting interests. Will the authorities have the courage to reveal that a public company is actually owned by nominees from the same group? Or will this just become a secret database that is never published for public consumption? Transparency without law enforcement is futile.

Third, the increase in the investment limit for pension funds and insurance from 8 percent to 20 percent in LQ45 stocks is a huge injection of liquidity. But look at the constituents of the LQ45. Isn’t it still dominated by the same old faces? The financial sector belongs to certain groups, mining belongs to certain groups, and consumer goods belong to certain groups.

Clearly, this is like watering flowers in a garden, but only the elephant grass thrives, while the new seeds of small and medium-sized enterprises that have gone public wither because they are not touched by water. Instead of encouraging economic diversification, we are continuing to fatten the giants. This is not market deepening, it is risk concentration.

Fourth, when Moody’s assigns ratings and Morgan Stanley Capital International (MSCI) conducts reviews, they assess liquidity and governance. However, these foreign investors are smart players. They know our market structure inside out. They can buy into conglomerate stocks, enjoy dividends, and then exit when there is turmoil, leaving retail investors stuck at the peak.

The Cure for Stock Speculation?

So, in addition to these four important points, there are at least a few other things to consider. Policies to prevent “onom-onom” and entertain the public need at least a few minor points of attention. First, enforcement of regulations must be paramount. So far, the domestic capital market has not lacked regulations.

But it lacks execution. Sanctions must be imposed consistently and have a deterrent effect. Law enforcement should not only occur when cases are already in the media, while “minor” daily violations are ignored. And, on paper, the Indonesian capital market already has anti-stock manipulation rules.

On paper, there are already investor protection mechanisms in place. But stock manipulation still occurs. In fact, it is becoming more sophisticated. Irresponsible market players are always one step ahead of regulators. Therefore, the existing rules must be strictly enforced.

Second, retail investor protection must be concrete, not just empty words. Form a special task force that is responsive to retail investor complaints about suspicious practices. Provide equal access to information. Do not let retail investors walk in the dark while the big players have the spotlight.

Third, the demutualization of the Indonesia Stock Exchange (IDX) must be accelerated with a clear objective: to separate regulatory functions from business interests. As long as the IDX still has conflicts of interest as an institution that also “sells” products, it is difficult to expect truly independent supervision. For example, if Danantara wants to enter, there should be no conflict of interest – as a regulator and owner of a public company.

Four, retail investor education must be massively improved. Smart investors are the best defense against market manipulation. When retail investors are able to read financial reports, understand ownership structures, and recognize signs of manipulation, fraudulent practices will find it difficult to thrive.

Do not make retail investors spectators who pay expensive tickets to watch the conglomerates’ magic show. This reform is a test. If it fails, do not blame retail investors—if one day they prefer to save their money under their mattresses rather than invest in the stock market.

And will foreign investors flock in just because the free float rule has been raised? I doubt it. Because foreign investors are sophisticated and are not merely dazzled by the lipstick on the financial statements, but rather by the extent to which the issuer’s governance complies with the rules that apply in the capital market.