Stock Market Needs a Buffer: Can Pension Funds and BPJS Be the Answer?
Domestic institutional investors have the potential to become a buffer for the Indonesian stock market amid the need to strengthen the long-term investor base. Pension funds, insurance companies, and BPJS Ketenagakerjaan are considered to have long-term fund characteristics that can support domestic market liquidity.
Capital market observer Elandry Pratama stated that the potential for domestic institutional investors to act as a market buffer is quite large, especially from pension funds, insurance companies, and BPJS Ketenagakerjaan. “In my opinion, the potential for domestic institutional investors to become a market buffer is quite large, especially from pension funds, insurance, and BPJS Ketenagakerjaan which have long-term fund characteristics,” Elandry said.
According to him, gradually increasing the investment allocation in shares can strengthen domestic liquidity while reducing the market’s dependence on foreign capital, which tends to be more volatile. “A gradual increase in the allocation to shares can strengthen domestic liquidity and reduce the market’s dependence on foreign capital, which tends to be more volatile,” he said.
Despite the potential to strengthen the stock market, Elandry stressed that the increase in equity investment by institutional investors must still be carried out prudently. According to him, institutions must consider risk, long-term liabilities, valuation, and liquidity in determining their investment allocation. “However, implementation must remain prudent because institutions must consider risk, long-term liabilities, valuation, and liquidity,” he continued.
Elandry assessed that the effort is not merely about increasing the allocation to shares, but also about building a consistent and long-term oriented domestic investor base. “So, in my opinion, it is not just about increasing the allocation to shares, but building a consistent and long-term oriented domestic investor base so that the market structure becomes more balanced,” he concluded.
Based on Financial Services Authority (OJK) Regulation Number 26 of 2025 concerning Asset and Liability Management for Insurance Companies and Reinsurance Companies, investment in shares listed on the Indonesia Stock Exchange (IDX) can reach a maximum of 40% of the company’s total investments. Meanwhile, to maintain prudential principles and prevent risk concentration in one company, the placement of investment in the shares of a single issuer is limited to a maximum of 10% of total investments.
This provision is important amid discussions regarding the potential increase in equity investment allocation by domestic institutional investors, particularly concerning perceptions about investment limits for insurance companies that have recently been associated with figures of 8% and 20%. Based on the current regulation, the investment limit for insurance companies in shares is not 8% or 20% of the total portfolio. POJK 26/2025 provides room for total equity investment of up to 40%, with a concentration limit on a single issuer of 10%.
Thus, if an insurance company has total investments of IDR 100 trillion, the regulation allows the company to place a maximum of IDR 40 trillion in shares listed on the exchange. Meanwhile, the placement in the shares of a single issuer may not exceed IDR 10 trillion or 10% of total investments. This provision means that insurance companies still have considerable room to enter the stock market. However, at the same time, companies are required to diversify so that investment risk is not concentrated in a single issuer.
POJK 26/2025 was enacted on 10 November 2025 and promulgated, coming into effect on 24 November 2025. This regulation replaces POJK Number 71/POJK.05/2016 concerning the Financial Health of Insurance Companies and Reinsurance Companies along with its amendments, including POJK Number 5 of 2023. OJK issued this new regulation, among other reasons, to strengthen investment governance, create a healthier industry ecosystem, and optimise the benefits of asset management for policyholders. The regulation also expands the choice of investment instruments for the insurance industry, including placements in exchange traded funds (ETF), including gold ETFs. Thus, the discourse regarding increasing the equity investment limit to 20% needs to be placed in the proper context. The 20% figure cannot simply be interpreted as meaning that the total equity investment limit for insurance companies is being raised from 8% to 20%. The prevailing OJK regulation actually provides room for aggregate equity investment of up to 40%, while the investment limit in the shares of a single issuer is set at 10%.