KUALA LUMPUR/HONG KONG (Jan 29): The fortunes of Indonesia’s richest tycoons have plunged by almost US$22 billion (RM86.46 billion) after MSCI Inc raised some fundamental questions about whether the nation’s companies are worth as much as their share prices suggest.
The biggest loser was Prajogo Pangestu, Indonesia’s richest person, whose net worth has dropped by around US$9 billion after his energy and mining companies slid. His net worth now stands at about US$31 billion, according to the Bloomberg Billionaires Index. His fortune has tumbled about US$15 billion this year.
The selloff was in response to an MSCI report that questioned Indonesian shareholder reporting rules, saying investors believe they result in opaque ownership structures that may invite improper trading. The statement from the New York-based index provider added new fuel to long-running concerns about concentrated shareholdings that underpin some of the biggest fortunes in Indonesia, and also elsewhere in Asia.
MSCI said it would pause some anticipated index changes and warned more consequences could follow if the matter isn’t addressed by May. The Jakarta Stock Exchange Composite Index closed down more than 7% on Wednesday and sank as much as 10% on Thursday.
“MSCI’s freeze is a warning shot,” said Tareck Horchani, head of prime brokerage dealing at Maybank Securities in Singapore. If Indonesian regulators can show progress, “this de-escalates quickly. If not, the risk premium stays.”
Prajogo owns 71% of energy company Barito Pacific Tbk PT and 84% of Petrindo Jaya Kreasi Tbk PT, a coal and gold miner. Both closed down more than 12% on Wednesday.
“We are reviewing MSCI’s recent statement in the normal course and will continue to engage constructively with all relevant stakeholders,” Nancy Tabardel, managing director of Pangestu’s family office, said in an email.
Haryanto Tjiptodihardjo lost almost US$3 billion in two days after his plastics maker Impack Pratama Industri Tbk PT ended down 15%. He controls 85% of the company’s stock. Billionaires from bank-owner Michael Hartono to coal miner Low Tuck Kwong also notched losses.
Indonesian billionaires on the 500-person Bloomberg rich index hold company stakes ranging from a few percentages to 92.5% of their total shares. Listed Indonesian companies must have a minimum free float of 7.5%.
Investors have for years called on Indonesia, home to Southeast Asia’s biggest equity market, to tighten reporting rules. Many of the country’s listed companies are controlled by one or a few individuals or entities, with only a minority of shares freely traded. That can lead to big and inexplicable price swings. Worries about market manipulation abound.
MSCI didn’t single out individual wrongdoers but said it would consider additional measures, which could reduce the weighting for all Indonesian companies in its emerging markets index, unless the country makes sufficient progress by May.
Tabardel declined to comment on Pangestu’s wealth but said his stakes in the companies haven’t changed materially for several years. The Barito group of companies has been investing heavily, supporting revenue growth and its contribution to Indonesia’s real economy, she wrote.
Thinly traded stocks have buoyed the fortunes of other tycoons in Asia.
Last year, Manuel Villar’s net worth ballooned to more than US$22 billion after the share price of Villar Land Holdings Corp, his thinly traded Manila-based property developer, soared to more than 1,000 times earnings, before crashing amid regulatory scrutiny.