Govt advised to float ADRs rather than shares overseas<\/p>\n
JAKARTA (JP): Securities analysts and capital market players
\nhave suggested that the government float depository receipts of
\nstate companies rather than their equity stocks in its overseas
\nlisting program.<\/p>\n
\"Using American depository receipts (ADRs) will minimize legal
\nproblems which often arise in listing a company in the United
\nStates,\" Tito Sulistio, the president of PT Penta Sena
\nSecurities.<\/p>\n
An ADR is a negotiable certificate issued by a U.S. bank for
\nshares issued by a foreign corporation. The depository receipts,
\nwhich are held in a custodial account either at the issuing bank
\nor with an agent, are registered with the U.S. Securities and
\nExchange Commission and are traded on local stock exchanges. The
\nreceipts essentially give the holder the same benefits as
\nshareholders while avoiding the complicated procedures that are
\nnecessary for a foreign company to issue stock in the U.S..<\/p>\n
Securities analysts say that, besides the less complicated
\nprocedures, the listing of ADRs will also benefit local investors
\nand stock exchanges -- as long as the company listed stock on the
\nJSX at the same time. The government hopes that this will give
\nthem the best of both worlds, allowing access to the American
\ncapital markets, while pumping up the volume of the JSX.<\/p>\n
\"Most of developing countries use this instrument in tapping
\ninvestment funds in the U.S. capital market,\" said Tito, also a
\nmember of the Supervisory Board of the Jakarta Stock Exchange
\n(JSX).<\/p>\n
The government plans to float the shares of at least 10 of its
\ncorporations overseas under its privatization program and PT
\nIndosat, the international telecommunication company, is now
\nbeing groomed to be the first company to go this route.<\/p>\n
The government has yet to decide where Indosat will be listed
\nbut an informed source said that it will be listed on the New
\nYork Stock Exchange.<\/p>\n
Voting rights<\/p>\n
Tito said another benefit in listing ADRs is that the
\ngovernment can impose certain arrangements to limit voting rights
\nof the depository receipt holders. These limitations on voting
\nrights will prevent the control of the company from falling into
\nthe hands of foreign investors.<\/p>\n
However, the government's plan to float state corporations'
\nshares on overseas stock markets has been widely criticized by
\nsome local market players, who want the companies stock to be
\nsold exclusively on the JSX.<\/p>\n
PT Semen Gresik is the only state-owned company listed on the
\nlocal market at present. With the listing of larger state
\ncorporations such as PT Indosat, PT Telkom, the domestic
\ntelecommunication service, subsidiaries of PT PLN electricity
\ncorporation and the national airline Garuda Indonesia, experts
\nfeel that JSX has the potential to be the largest stock market in
\nSoutheast Asia. (hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-advised-to-float-adrs-rather-than-shares-overseas-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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