Incentives needed for sluggish bond market<\/p>\n
JAKARTA (JP): The Indonesian government needs to issue special
\nincentives and ease tax rulings to reinvigorate dormant trading
\non the secondary market of bond instruments.<\/p>\n
Basjiruddin A. Sarida, the president of the Surabaya Stock
\nExchange (SSE), said yesterday the government's role in
\nmobilizing the secondary market of debt instruments is urgently
\nneeded.<\/p>\n
\"The government should at least facilitate the operation of a
\nmarket dealer,\" he told a capital market convention.<\/p>\n
The convention, organized by the Singapore-based AIC
\nConference Pte Ltd, is being attended by 125 foreign and local
\nsecurities dealers and investors. The two-day conference will end
\ntoday.<\/p>\n
Speakers at the conference, including executives of
\ninternational securities companies, mainly blamed the government
\nfor the sluggish trading on the bond secondary market.<\/p>\n
\"The government has been successful in developing the primary
\nmarket but it seems to forget the secondary trading,\" Gustiaman
\nDeru, a director of Pregrine Securities S'pore Pte. Ltd. told the
\nconference participants.<\/p>\n
Deru described the lack of a reliable clearing and depository
\nmarket as the most horrible problem for foreign fund mangers when
\ndealing on the secondary market of debt instruments in Indonesia.<\/p>\n
Clearing<\/p>\n
\"We have to put heaps of bond certificates and their coupons
\nin a big car when delivering the securities to buyers,\" another
\nspeaker told the conference participants about the difficulty
\noften encountered by securities dealers due to the absence of a
\nclearing depository agency.<\/p>\n
He said the problem occurs because many bond certificates
\ncarry a par value of less than Rp 50,000. \"Imagine if you buy one
\nmillion U.S. dollars worth of bonds,\" he added.<\/p>\n
Besides having extra messy jobs such as taking out coupons
\nfrom millions of bond certificates, securities dealers also have
\nto wait for at least one day to get interest yields from the
\npaying bank.<\/p>\n
\"The paying bank often has not enough cash to pay the coupon
\nyields until the next day,\" he said concerning the weakness of
\nthe settlement system in the country's bond secondary market.<\/p>\n
Basjiruddin said to start a secondary market for bonds, there
\nshould be least two market makers operating for each bond
\nissuance.<\/p>\n
\"Market makers must provide a large amount of funds.
\nTherefore, giving special incentives to them is essential to
\nboost the secondary market,\" he said of how to stimulate the
\ninactive bond trading.<\/p>\n
\"The government must also give a rediscounted facility so that
\nbonds can be engaged as a secondary reserve in banking,\" he said.<\/p>\n
At least 68 bond issues, with a par value of Rp 6.29 trillion
\n(US$2.92 billion), are listed on the Jakarta, Surabaya and OTC
\nstock markets at present. However, trading activities on the
\nsecondary market remain inactive.<\/p>\n
Basjiruddin said a number of bonds were, in fact, often traded
\nbut that both buyers and sellers did not report the transaction,
\nto avoid tax and fee payment.<\/p>\n
\"We should, therefore, change the form of debt instruments now
\navailable from bearer bonds to registered ones to prevent such a
\npractice,\" he said<\/p>\n
Most of debt instruments listed on the Indonesian markets are
\nin bearer forms which do not carry names of their holders. This
\nform of bonds could be easily traded outside the market system as
\nowners do not have to register them. (hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/incentives-needed-for-sluggish-bond-market-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}