Course : FINC6019 Introduction to Money and

Capital Market
Effective Period : September 2019

Capital Market in Indonesia

Session 8

Copyright ©2015 Pearson Education, Ltd. All rights reserved. 11-1

 Acknowledgement

These slides have been adapted from:

1. Otoritas Jasa Keuangan (OJK). (2016). Pasar Modal – Seri Literasi

Keuangan Perguruan Tinggi. 3. Jakarta. ISBN -
2. Sri Hermuningsih. (2012). Pengantar Pasar modal Indonesia. 01. 1st
Books Library. Yogyakarta. ISBN: 9788783532578.
 Contents

• History of Capital Market

• Capital Market in Indonesia
• Definition of Capital Market Indonesia
• Benefit of Capital Market
• Definition of Stock Exchange
• Benefit of Stock Exchange
 Learning Objectives

• LO 1. The students are able to understand the

history of capital market
• LO 2. The students are able to explain the capital
market in Indonesia
 Sejarah Pasar Modal

Sejarah Pasar Modal Dunia

1. Pasar modal pertama di dunia:

Vereenigde Oostindische Compagnie
(VOC) – (1602-1799)
2. Pasar modal Amerika Serikat
 Sejarah Pasar Modal

Sejarah Pasar Modal Indonesia

1. Perkembangan pada awal abad ke -19

2. Deregulasi pasar modal
3. Merger Bursa Efek Jakarta (BEJ) dan
Bursa Efek Surabaya
4. Pengalihan Pengawasan dari
Kementerian Keuangan ke Otoritas Jasa
Keuangan
Capital Market in Indonesia

What is Capital Market? Capital market is

market in which money traded in form of
shares, bonds and other derivatives. The
buyer is a person or company who need
money and the seller is the
person/company who has excess money
 Indonesian Capital Market

• Capital market is one investment alternative for the

community. Through the capital market, investors can
invest in several companies through the purchase of
securities offered or traded in the capital market.
• Meanwhile, the company or often referred to as emiten
can obtain the required funds by offering the securities.
• The existence of the capital market allows investors to
have a healthy and prospective company.
• Widespread ownership spread will encourage
companies to transparent financial statements.
• This will insist the company towards the creation of
Good Corporate Governance.
 Undang-Undang Pasar Modal No 8 tahun 1995

The Law of the Republic of Indonesia

Number 8 of 1995 concerning the Capital
Market is a general provision concerning
Capital Market law. Contains definitions,
understandings, and rules and regulations
on activity in the capital market. It contains
about ...(please continue from your
independent research)
 Understanding Stock Exchange

Based on Law No.8 of 1995 on Capital Market:

a. Stock Exchange is a party that organizes and
provides a system and / or means to
reconcile the sale and purchase of securities
of other parties for the purpose of trading
securities among them
b. Securities are securities, namely letters of
payable, commercial paper, stocks, bonds,
debt certificates, contractual deposit units,
collective investments, futures contracts on
securities, and any securities of securities.
 The role of the Securities Exchange

Stock Exchange has an important role as follow:

1. Provide all means of securities trading (facilitator)
2. Make rules relating to stock exchange activities.
3. Seeks instrument liquidity.
4. Prevent practices that are prohibited under the
bureaucracy (collusion, unnatural price
formation, insider trading, etc.).
5. Disseminating stock information.
6. Creating new instruments and services
Thus, the stock is similar to the market in general,
the difference being that traded securities as a sign
of ownership of companies listing in the capital
market
 Role of Capital Market
Capital markets have a role, among others:
1. As a financial intermediary other than a bank Allows
investors to participate in profitable business activities
(investment).
2. Allows business activities to obtain funds from outside
parties in the framework of business expansion
(expansion).
3. Allows business activities to separate business and
economic operations from financial activities.
4. Allow the holders of securities to obtain liquidity by
selling securities owned to other parties
 Various financial markets

Financial Markets is a meeting between the supply

and demand of financial assets

Financial Market is divided into 2 as follow:

1. Money Market
2. Capital Market
 Money market

The money market is a meeting between short-term

fund demand and supply.
In the money market, foreign exchange is required to
pay import export activities, foreign debt

The characteristics of the money market are:

1.Emphasizes short-term fulfillment
2. Money market mechanisms are emphasized to
bring together the excess funds and those who need
the funds
3. Not tied to a specific place like its capital market
 Money Market Players

1. Bank Foundation
2. Pension fund
3. Insurance company
4. Big companies
5. Government agencies
6. Other Financial Institutions
7. Individuals

Examples of SBIs, deposits, interbank call

money, commercial papers, treasury bills
 The purpose of money market

From parties that need funds:

1. To meet short-term needs
2. To meet liquidity needs
3. To meet working capital needs In the middle of
losing clearing

From the party who invested the funds are:

4. To earn income with a certain interest rate
5. Helping parties who are experiencing financial
difficulties
6. Speculation
 Capital market
• The stock market trades securities such as stocks,
bonds and mutual funds. Companies that require
additional venture capital can sell some of their
shares through the stock market or issue bonds.
• The addition of capital by issuing shares or bonds is
considered cheaper than applying for credit in the
bank
• Capital markets are markets where they trade a
wide range of long-term tradable financial
instruments, such as stocks, bonds, mutual funds,
derivative products.
• Capital market is a means of funding for companies
and government institutions, as well as a means for
people to conduct investment activities.
 Equation of Money Market and Capital
Market

Money Market Capital Market

Part of Financial Market Part of Financial Market

Intermediary between surplus and Intermediary between surplus and

deficit deficit

Financial products Financial products

 The Differences between Money Market and Capital
Market

Money Market Capital Market

Short term<270 days Long term
Products: sertifikat deposito, tabungan, Products: Bond, mutual funds, and
SBI, commercial paper shares
The highest authority is Bank Indonesia The highest authority is OJK (Otoritas Jasa
Keuangan)

No secondary market secondary market always available

Just have a mutual fund product Has option derivative products, warrant,
derivative and right
Low risk low return High risk high return

Products can be found in the bank Available only in stock exchange

Monitored by BI and OJK Monitored by OJK
 Types of Capital Markets

There are four kinds of capital markets:

1. Primary Market. Is a market where securities are traded for the
first time before they are listed on the stock exchange.
2. Secondary Market. Is the market of securities that have been
listed on the exchange. The secondary market is where the
investor makes a sale and purchase of securities after such
securities are listed in the stock as a continuation of the
primary market.
3. Third Market. Also called OTC (Over The Counter) is a means of
buying and selling securities transactions between members of
the stock and investors and prices formed by market maker
4. Fourth Market. Is a sale and purchase transactions investors
without intermediary securities because it can save transaction
costs
 The Types of Capital Market
Primary Market Secondary Market Third Markets Fourth Market

The stock price is Stock prices Price is formed by The price is formed
fixed fluctuate market maker from bargaining
No commission Charged No commission No commission
charge commission fee charge charge

Only for the buyer For buyers and Investors buy and Investors buy / sell
of bonds / shares sellers of bonds / sell from market via ECN (Electronic
shares maker Communication
Network)

Reservations are Reservations made Reservations made Investors become

made through the through stock through market ECN members
agent brokers maker
Limited timeframe Unlimited duration Unlimited duration Unlimited duration
Total numbers of companies listed in IDX

As at December 31 2001, there were 316

companies listed on the JSX and 205
companies listed on the SSX.
As at December 31 2016, there were 532
companies listed on the IDX.