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The Jakarta Composite Index’s 67 percent gain this year makes the Indonesia Stock Exchange, which is celebrating its 32nd anniversary this week, the third best-performing bourse in Asia, the capital market watchdog said on Wednesday.

Two Chinese bourses, the Shenzhen and Shanghai markets, ranked first and second with gains of 93 percent and 74 percent, respectively, according to Bloomberg.

The Taiwanese and Philippine markets ranked fourth and fifth in the region this year, gaining 47 percent and 45 percent, respectively.

“Our market capitalization increased from Rp 1,143 trillion [$115.4 billion] on Jan. 5 to Rp 1,882 trillion on Aug. 11,” Fuad Rahmany, chairman of the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK), said on Wednesday during a press briefing marking the anniversary of the Jakarta exchange, or IDX.

He said gains in the index and the increased market capitalization underscored the revival of investor confidence since last year’s crash. Fuad said stock transactions totaled Rp 596 trillion from Jan. 5 to Aug. 11, with Rp 3.9 trillion in average daily transactions.

“Daily transactions so far this month have reached Rp 7 trillion, which is a very attractive level of trading,” said IDX president director Ito Warsito, adding that the success of the presidential election had supported the market.

Ito said average daily trading frequency rose 44 percent to 85,000 daily transactions this year, while average trading volume rose 94 percent to 3.3 billion shares. “The increase in trading volume and frequency was supported by the increase in the number of retail investors who traded stocks online,” he said.

However, Ananta Wiyogo, president director of the Indonesian Central Securities Depository (KSEI), said foreign investors still dominated the market, holding 66 percent of the capital value, up from 64 percent last year.

But local investors dominated trading of corporate and Islamic bonds, accounting for 97 percent of the total of 78 trillion transactions, up from 76 percent in 2008.

Ananta said total accounts of investors rose 23 percent from last year, to 338,829 accounts as of July.

Fuad said foreign investors were clearly confident in the market, but said trading might be less volatile, especially in times of crisis, if local investors played a greater role. “It would be better if local investors were driving the local stock exchange,” he said.

Yanuar Rizky, an independent capital market observer, said Bapepam-LK should try different tactics to attract more local investors.

“There are still undiscovered investors out there who have been barely reached by the capital market,” he said.

Yanuar said the recent growth in online trading had attracted mostly short-term traders, while the market needed long-term investors.

Regulators should coordinate with local institutional investors to fill the gap, should foreign investors withdraw from the market en masse, Yanuar said.

“Institutions or insurance firms should be ready with funds to be used to fill the gap when foreign investors sell,” he said.

The IDX has been targeting to have at least two million investors by 2012. China is said to have recently attracted two million new investors in just one month.