IDX Industrial Classification (IDX-IC)

The Indonesia Stock Exchange (IDX) introduced the IDX Industrial Classification (IDX-IC) to provide a more comprehensive, relevant, and standardized framework for categorizing listed companies. As the Indonesian capital market evolves, this classification system ensures that investors, analysts, and market participants have an accurate way to compare companies based on their core business activities and revenue sources.

Prior to the adoption of IDX-IC, the exchange utilized the Jakarta Stock Industrial Classification (JASICA). While effective for years, JASICA eventually struggled to keep pace with the rapid digitalization and diversification of businesses in Indonesia. IDX-IC was launched to align with international standards, ensuring better comparability with global markets and providing a more granular view of the modern economy.

The IDX-IC is structured in a hierarchical format, consisting of four distinct levels. This structure allows for both a high-level overview of the economy and a deep dive into specific niches:

• Sector: The broadest level, representing the primary economic activity (e.g., Basic Materials, Consumer Cyclicals).
• Sub-Sector: Provides a more refined grouping within the sector.
• Industry: Focuses on the specific field of operation.
• Sub-Industry: The most granular level, identifying the specific products or services provided by the company.

The system categorizes all listed firms into 12 primary sectors, reflecting the dynamic nature of the Indonesian economy:

1. Energy: Oil, gas, and coal exploration and production.
2. Basic Materials: Mining, chemicals, and forestry products.
3. Industrials: Manufacturing, engineering, and logistics.
4. Consumer Cyclicals: Retail, automotive, and tourism.
5. Consumer Non-Cyclicals: Food, beverage, and household products.
6. Healthcare: Pharmaceuticals and medical services.
7. Financials: Banking, insurance, and investment firms.
8. Properties & Real Estate: Development and management of property.
9. Technology: Software, hardware, and digital services.
10. Infrastructures: Telecommunications, energy utilities, and transportation.
11. Transportation & Logistics: Services related to the movement of goods and people.

For investors, the IDX-IC is a critical tool for portfolio diversification and analysis. When constructing a portfolio, the system allows for effective sector allocation, ensuring that risk is spread across different economic areas. Furthermore, by identifying companies within the same Sub-Industry, investors can conduct "apples-to-apples" financial analysis, comparing key performance indicators such as Profit Margins, Debt-to-Equity ratios, and Price-to-Earnings multiples.

The IDX Industrial Classification represents a significant step forward in the transparency and maturity of the Indonesian capital market. By adopting a modern, hierarchical, and globally aligned framework, the IDX has empowered investors to make more informed decisions, fostering a more efficient and liquid market environment. As the economy shifts toward digital infrastructure and sustainable energy, the IDX-IC serves as a living standard that will continue to reflect the changing face of Indonesian business.