Analysts warn of risks as IDX brings back short selling
The Indonesia Stock Exchange (IDX) is cautiously reintroducing short-selling in equities in a move to improve liquidity on the local bourse, but the measure could have negative side effects unless it comes with stringent regulatory enforcement.
The Indonesia Stock Exchange (IDX) is cautiously reintroducing short-selling in equities to boost liquidity on the local bourse, but analysts warn of potential negative consequences unless stringent regulations are enforced. Avere Investama director Teguh Hidayat explained to The Jakarta Post that Indonesia's stock market is susceptible to price manipulation, a concern previously noted by index compiler MSCI.
Despite regulations against foul play, their enforcement is questionable, which could present a structural risk, especially for short selling. Hidayat warned that lax enforcement could enable large-scale manipulation for profit, potentially leading to a market crash that could "impact our economy." Short selling involves selling borrowed stocks with the expectation of buying them back at a lower price, profiting from the price difference after accounting for brokerage fees and interest.
If the stock price rises instead, investors face losses, as they must buy back the shorted stock at a higher cost to close their position.
Written by urgent.news from The Jakarta Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
