Indonesian IPO Market Reforms and Their Impact on Foreign Investment Appetite

The Indonesian capital market has undergone a transformative period since 2023, marked by regulatory reforms aimed at stabilizing the IPO ecosystem and enhancing long-term liquidity. These changes, driven by the Financial Services Authority (OJK) and the Indonesia Stock Exchange (IDX), reflect a strategic shift from prioritizing volume to emphasizing quality in initial public offerings (IPOs). This recalibration has not only reshaped domestic market dynamics but also recalibrated foreign investors' perceptions of Indonesia's capital market as a viable destination for capital.

Regulatory Reforms: A Shift from Volume to Value

The cornerstone of Indonesia's IPO reforms lies in relaxing rigid listing requirements. Traditionally, companies seeking a mainboard listing had to meet strict profitability or asset thresholds. However, recent changes allow firms to qualify based on alternative metrics such as market capitalization or operating cash flow according to the IDX's new regulation. This flexibility has broadened the pool of potential IPO candidates, particularly in high-growth sectors like technology and services.

Complementing this is the introduction of a "free float" policy, which mandates a minimum public ownership of 7.5%-a figure slated to rise to 25% in stages according to Reuters. By increasing the proportion of tradable shares, this reform aims to enhance market liquidity and reduce volatility. Additionally, the IDX has explored dual-class share structures, a feature common in global tech listings, to accommodate firms with unconventional governance models according to Nusantaralegal. These measures collectively signal Indonesia's intent to align its capital market with international standards.

Foreign Investment: Lower Barriers, Higher Confidence

Regulatory easing has directly influenced foreign participation. A pivotal reform was the reduction of the minimum paid-up capital requirement for foreign-owned companies from IDR 10 billion to IDR 2.5 billion according to ASEAN Briefing. This cut entry barriers, particularly for private equity and venture capital firms, which are now more inclined to invest in Indonesian IPOs. For instance, in Q3 2025, total IPO proceeds tripled to US$906 million despite a 35% decline in deal count, underscoring a shift toward high-value listings that appeal to foreign investors seeking quality over quantity according to EY's Q3 2025 IPO Review.

The OJK's emphasis on stringent pre-IPO scrutiny has further bolstered confidence. By filtering out weaker candidates, regulators have improved the overall quality of IPOs, making them more attractive to foreign investors who prioritize transparency and governance according to EY's Q3 2025 IPO Review. This is evident in the IDX's "IPO Masterclass 2025," which educates companies on meeting investor expectations and long-term value creation according to EY's Q3 2025 IPO Review. Such initiatives have fostered a more predictable environment, critical for foreign capital inflows.

Liquidity and Market Stability: A Delicate Balance

Liquidity metrics have shown measurable improvement. The OJK introduced liquidity providers in 2024 to enhance trading depth, a move that has stabilized post-IPO price volatility. Concurrently, the gradual increase in free float requirements is expected to amplify trading volumes by making a larger share of listed companies' equity available for trading according to Reuters. For example, the IDX reported a surge in market liquidity, with total IPO-related trading rising by IDR 16.2 trillion in Q3 2025.

However, challenges remain. While the 2024 IPO market saw a sharp decline in activity-40 IPOs raising IDR 10.1 trillion compared to 79 IPOs in 2023-2025 has shown cautious optimism according to EY's 2024 IPO Review. Global uncertainties, such as the 2024 presidential election and macroeconomic fluctuations, initially dampened investor sentiment. Yet, policy clarity and infrastructure development have since rekindled interest, with six IPOs still in the pipeline as of late 2025 according to IDX press release.

Conclusion: A Market in Transition

Indonesia's IPO reforms represent a calculated effort to stabilize its capital market while attracting foreign investment. By prioritizing quality, liquidity, and governance, regulators have laid the groundwork for a more resilient IPO ecosystem. While the immediate impact includes a reduction in deal numbers, the long-term benefits-higher proceeds, improved market depth, and enhanced foreign participation-suggest a maturing market. For foreign investors, the key takeaway is clear: Indonesia's IPO market is evolving into a more sophisticated and competitive arena, offering opportunities aligned with global best practices.