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The inauguration of the Daya Anagata Nusantara Investment Management Agency (BP Danantara) on Monday, February 24, 2025 has yet to show positive catalyst for Indonesian capital market investors.
In trading on Tuesday, February 25, 2025, the Composite Stock Price Index (IHSG) closed down 2.41 percent at 6,587. In the previous trade, right on the day of the launch of Danantara, The Indonesia Stock Exchange Composite Index (IHSG) closed down 0.78 percent at the level of 6,749. In the opening session, IHSG had strengthened to the level of 6,800.
The sluggish movement of the IHSG over the past few days was triggered by the downgrade of the Indonesian stock market rating by Morgan Stanley Capital International (MSCI) from equal weight to underweight.
In the latest announcement released on February 19, 2025, MSCI cited that there was a shift in the trend of Indonesia's return on equity (ROE) which was depressed due to the weakening domestic economy.
Jonathan F. Garner, Equity Strategist at Morgan Stanley, said the financial services company is still cautious about the possibility of recovery in the near term and tends to choose investment exposure in other ASEAN countries.
“Geopolitical factors also contribute to the decline in investment risk in China,” Garner wrote in his research, on Tuesday, February 25, 2025.
Investors on the other hand are hoping for a positive signal from the launch of BP Danantara by President Prabowo Subianto last Monday. After the launch, it is planned to manage around US$900 billion (Rp14,616 trillion) in assets under management (AUM).
Yet, the launch of BP Danantara is still not strong enough to attract investor confidence in the Indonesian stock market. Mirae Asset Sekuritas research noted that foreign capital outflows on Monday, February 24, 2025 reached Rp3.4 trillion.
Investor pessimism
Budi Frensidy, Economic Professor at the University of Indonesia, assessed that there is pessimism from market players regarding the future of the new institution that will become the super holding of the State-Owned Enterprises (SOEs).
"There are investor concerns and skepticism about Danantara's prospects," Budi said as quoted by Katadata.co.id, on Tuesday, February 25, 2025.
He cited that the figures appointed by Prabowo to lead Danantara are considered not strong enough in the eyes of investors. He believes that the figures in Danantara should be competent professionals or have experience in managing Sovereign Wealth Funds (SWF).
In addition, he highlighted the issue of Danantara's governance that has not been widely revealed to the public. As a giant institution, Danantara should be more transparent and have proven risk management and compliance.
"But almost all of them (figures in Danantara) are politicians and state officials and many are confused about whether this is a political institution or a fund manager," Budi said.
Prabowo has named various political and business figures, including Minister of Investment and Downstream/Head of the Investment Coordinating Board (BKPM) Rosan Perkasa Roeslani as CEO of Danantara.
In addition, Dony Oskaria, Deputy Minister of SOEs, was appointed as Chief Operating Officer (COO) and businessman Pandu Sjahrir as Chief Investment Officer (CIO).
Prabowo also named the country’s 6th and 7th presidents − Susilo Bambang Yudhoyono and Joko Widodo − as members of the Danantara Advisory Board.
Meanwhile, Minister of SOEs Erick Thohir is tasked to chair the agency’s Supervisory Board, former Deputy Central Bank Governor Muliaman D. Hahad is named Erick’s deputy and Minister of Finance Sri Mulyani Indrawati is appointed as member of the Supervisory Board.
Future hopes
Issues of governance and implementation of Danantara have drawn are immediately on the spotlight.
Achmad Nur Hidayat, Economist and Public Policy Expert at the Veteran National Development University, Jakarta, assessed that Danantara will have power after being officially launched by Prabowo, but warned of minimum supervision and its exclusive status directly under the President.
"This indicates the existence of very large institutional power, but with minimal supervision," Hidayat said on Tuesday, February 25, 2025.
He said further that in the context of bureaucracy, Danantara is not subject to the same accountability mechanism as SOEs in general. In fact, the Law that regulates this agency stipulates that losses experienced by Danantara will not be considered State losses.
This regulation is stated in the final draft of the Bill on State-Owned Enterprises (SOEs) which was discussed at the 12th Plenary Meeting of the House of Representatives (DPR) Second Hearing Session for 2024-2025, which stipulates that profits and losses that occur when managing assets are the profits and losses of Danantara itself and not the State.
"The implications of this rule are quite serious. Without an adequate system of checks and balances, there is a high possibility of abuse of authority," Hidayat said.
Through the implications of this serious regulation, concerns have arisen that have prompted various investors to “wait and see” until significant activity is carried out by Danantara.
However, Iman Rachman, President Director of the Indonesia Stock Exchange (IDX) remains optimistic and believes that the presence of the investment management institution will bring a positive impact and refresh the Indonesian capital market.
He views that if the issuers managed by Danantara show good performance, this can encourage movement in the IHSG and increase market capitalization.
Corporate actions or fundraising carried out by these issuers are expected to revive the market, especially if the issuer's operations run well.
Iman concluded that the most important thing is that the stock market capitalization will increase and fundraising activities can provide a positive boost to the capital market. He is also confident that the figures selected by Danantara are figures who have good track records.
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