OpEd: Rising Retail Investors And Influencers

In an Opinion Piece in Bisnis.Com, Patria, a Financial Services Authority Analyst – Analyst at The Financial Services Authority writes that despite the dire predictions of a global economic recession in 2023, the number of investors in the Indonesian capital market is still increasing.

He writes that the Indonesian Central Securities Depository (KSEI) has noted that the number of investors as of September 2022 was 9.78-million people, an increase of 2.48-percent compared to the previous month.

This increase is indeed not as intense as at the end of 2021, where the number of investors doubled compared to the previous year to a total of 7.48-million people, but this proves that our capital market still has potential and is able to attract new investors.

Based on this data, the demographics of investors are still dominated by young investors where 60-percent of them are under 30-years old. With such a large proportion, this group of investors has market power that needs to be taken into account, although in terms of assets it is still below other age groups.

With the dominance of these new and millennial investors, Indonesian capital market players must pay close attention to the investment patterns of this group. In some cases, new investors and millennials are heavily influenced by trends in the community and influencers on social media that can cause stock prices to rise quite high and exceed their fair value, including in stocks of technology start up companies and digital banks.

Although fundamentally the performance of these issuers is still quite good, in extreme cases the influence of social media trends must be watched out for. To understand this, we can learn from the movement of GameStop stocks in early 2021 in the US.

GameStop is a video game outlet company whose performance has deteriorated due to competition from online stores and the pandemic. With predictions that the stock price will continue to fall, hedge fund companies are short-selling GameStop shares to make a profit. However, several stock influencers who are members of the Reddit social forum have succeeded in influencing newbie retail investors to buy GameStop shares with the belief that if GameStop’s stock value rises it will trigger a short squeeze, in which hedge funds that have short positions on GameStop will sell at a lower price. large volume to close positions, which will result in the value of the stock going up.

The success of a group of budding investors on Reddit forums to encourage the purchase of GameStop shares then went viral on social media and increasingly influenced buying by new investors. GameStop shares are also gaining popularity, driven by influential figures such as Elon Musk and Chamath Palihapitiya. On January 28, 2021, GameStop’s stock price peaked at USD 500-per share, well above its valuation at the beginning of the month which was only USD 17.25, with the majority of stock buyers being young and novice investors.

At this peak position, the trading platform Robinhood, which is the means by which the majority of retail investors buy GameStop shares, experienced liquidity problems due to high transactions, which halted the transaction to buy GameStop shares. As a result, on February 2, GameStop’s stock price dropped to below USD 100-per share.

Some parties say the value lost due to the decline reached USD 27-billion, with many losses experienced by novice investors. For several months after that, GameStop’s stock price continued to experience volatility. The stock price that no longer reflects the value of the company causes many investors to make transactions based on speculation, causing huge losses.

In Indonesia, high stock movements by influencers and social media have actually been anticipated in the Capital Market Law which prohibits all parties from submitting misleading material facts to influence other parties to buy or sell securities. In addition, OJK and the Indonesia Stock Exchange also have policies to manage market volatility through the prohibition of short selling, asymmetric auto-rejection, and trading halts under certain conditions.

However, learning from the GameStop case, what is more important and needs to be supported by all parties is that novice investors must continue to be educated about investment sustainability.

A good knowledge of the fair returns and risks in the capital market is required as well as an understanding that the capital market is not a place to seek instant results from speculative transactions. Investors also need to prioritize fundamental analysis and long-term investment in buying shares, so that they are not affected by temporary trends.

Educational events such as the recently held Capital Market Summit & Expo 2022 should continue to be encouraged. In the end, with increasing good and responsible investment by investors, our capital market will be stronger so that it can advance the national economy. The presence of new investors will also strengthen the domestic investor base so as to reduce market vulnerability to global economic influences.

Source: Bisnis.Com

Latest Article
Indonesia, China Discuss Economic Cooperation
President Jokowi received an honorary visit from Wang Yi, the Minister of Foreign Affairs of the People’s...
President Meets Tony Blair, Discusses Energy Investment and Accelerating Digital Transformation
In a release published on the website of The President of The Republic of Indonesia, President Jokowi...
Kominfo: Microsoft to Invest in Indonesia
Usman Kansong, the Director General of Communication and Public Information at the Communication and...
USTDA Advances Smart City Solutions for Nusantara
A press release published by the U.S. Trade and Development Agency (USTDA) on Wednesday (17/4/24,) announced...
BI Expected to Raise Interest Rates as Rupiah Weakens
According to reporting from Jakarta Globe, Bank Indonesia (BI) is anticipated to increase its benchmark...

Andrzej Barski

Director of Seven Stones Indonesia

Andrzej is Co-owner/ Founder and Director of Seven Stones Indonesia. He was born in the UK to Polish parents and has been living in Indonesia for more than 33-years. He is a skilled writer, trainer and marketer with a deep understanding of Indonesia and its many cultures after spending many years travelling across the archipelago from North Sumatra to Irian Jaya.

His experience covers Marketing, Branding, Advertising, Publishing, Real Estate and Training for 5-Star Hotels and Resorts in Bali and Jakarta, which has given him a passion for the customer experience. He’s a published author and a regular contributor to local and regional publications. His interests include conservation, eco-conscious initiatives, spirituality and motorcycles. Andrzej speaks English and Indonesian.

Terje H. Nilsen

Director of Seven Stones Indonesia

Terje is from Norway and has been living in Indonesia for over 20-years. He first came to Indonesia as a child and after earning his degree in Business Administration from the University of Agder in Norway, he moved to Indonesia in 1993, where he has worked in leading positions in education and the fitness/ wellness industries all over Indonesia including Jakarta, Banjarmasin, Medan and Bali.

He was Co-owner and CEO of the Paradise Property Group for 10-years and led the company to great success. He is now Co-owner/ Founder and Director of Seven Stones Indonesia offering market entry services for foreign investors, legal advice, sourcing of investments and in particular real estate investments. He has a soft spot for eco-friendly and socially sustainable projects and investments, while his personal business strengths are in property law, tourism trends, macroeconomics, Indonesian government and regulations. His personal interests are in sport, adventure, history and spiritual experiences.

Terje’s leadership, drive and knowledge are recognised across many industries and his unrivalled network of high level contacts in government and business spans the globe. He believes you do good and do well but always in that order. Terje speaks English, Indonesian and Norwegian.

Contact Our Consultants

Ridwan Jasin Zachrie

CFO of Seven Stones Indonesia, Jakarta

Ridwan is one of Indonesia’s top executives with a long and illustrious career in the financial world. He holds several professional certifications including being a Certified Business Valuer (CBV) issued by the Australian Academy of Finance and Management; Broker-Dealer Representative (WPPE); and The Directorship Certification for Directors and Commissioners, issued by the Indonesian Institute of Commissioners and Directors.

His experience includes being the Managing Director at one of the top investment banking groups in the region, the Recapital Group, the CFO at State-owned enterprises in fishery industry and the CEO at Tanri Abeng & Son Holding. He’s also been an Independent Commissioner in several Financial Service companies and on the Audit and Risk Committee at Bank BTPN Tbk, Berau Coal Energy Tbk, Aetra Air Jakarta as well as working for Citibank, Bank Mandiri and HSBC. His last position was as CFO at PT Citra Putra Mandiri – OSO Group.

Ridwan has won a number of prestigious awards including the Best CFO Awards 2019 (Institute of Certified Management Accountant Australia-Indonesia); Asia Pacific Young Business Leader awarded by Asia 21 Network New York USA (Tokyo 2008); UK Alumni Business Awards 2008 awarded by the British Council; and The Most Inspiring Human Resources Practitioners’ version of Human Capital Magazine 2010.

He’s a member of the Board of Trustees of the Alumni Association of the Faculty of Law, Trisakti University, Co-Founder of the Paramadina Public Policy Institute and actively writes books, publications and articles in the mass media. He co-authored “Korupsi Mengorupsi Indonesia” in 2009, which helps those with an interest in understanding governance in Indonesia and the critical issue of corruption. Ridwan speaks Indonesian and English.

Per Fredrik Ecker

Managing Director of Seven Stones Indonesia, Jakarta

Per is the Managing Director of the Seven Stones Indonesia (SSI) Jakarta office and has more than 25-years’ experience in Indonesia, China, and Western Europe. He previously worked in senior management positions with Q-Free ASA, Siemens AG, and other companies in the telecom sector. Over the last six years, he has been the Chairman of the Indonesia-Norway Business Council (INBC) and recently become elected to be on the board of EuroCham Indonesia.

His most recent experience is within Intelligent Transport Solutions (ITS), Telecom, and other sectors within the Indonesian market. He is today through his position in SSI and by representing Norway Connect, promoting Nordic and European companies that would like to explore business opportunities in the Indonesian market. He’s also playing an active role to help create the Nordic House concept in Jakarta that will provide an excellent platform for Nordic companies entering Indonesia, where they’ll find a community that can offer support with trusted information and affordable services to enter this market.