Securities Trading in an Emerging Market: Indonesia, 1890s-1950s

This paper analyses trends in the development of the stock exchange in Jakarta between its stepwise institutionalisation since 1898 and its demise after 1958. The paper contributes to literature on the significance of stock markets in the process of mobilising external capital for investment by private enterprise in emerging economies. It finds that the brokers participating in the stock exchange traded shares and bonds of companies operating in Indonesia and registered in Indonesia or in The Netherlands. Many of these securities were also traded on the much larger stock exchange in Amsterdam. Although formally independent, both securities markets were integrated. Based on estimates of relatively high market capitalisation during 1901-1940, the paper concludes that the Jakarta and Amsterdam stock exchanges together contributed significantly to the mobilisation of private investment and the development of private enterprise in Indonesia.