JSX management to review composite index criteria<\/p>\n
JAKARTA (JP): The Jakarta Stock Exchange (JSX) management said
\non Tuesday it would review criteria for calculating the composite
\nindex after a huge rights issue by Bank Danamon virtually left
\nthe index at its mercy.<\/p>\n
Analysts hailed the move, saying it would prevent fund
\nmanagers from abandoning the index on the pretext it no longer
\nrepresented the entire market picture.<\/p>\n
Bank Danamon's 215 billion rights issue on Monday made it the
\nlargest stock and gave it a disproportionate influence on the
\nindex, the exchange said in a statement.<\/p>\n
One point movement, equivalent to a Rp 25 rise or fall, in
\nDanamon's shares will cause the benchmark index to fluctuate
\n10.861 points, it said.<\/p>\n
\"Starting April 6, the calculation of the composite index will
\nno longer include shares that are added in very large numbers,\"
\nit announced.<\/p>\n
\"In the meantime, the JSX along with the index committee will
\nreview the criteria for calculating the index in order to ensure
\nit is reasonable even if there are additions of shares in large
\nnumbers.\"<\/p>\n
The research head at Trimegah Securindolestari, David Chang,
\nsaid the move was needed to make the index representative of the
\nentire market situation.<\/p>\n
He also believed it was timely, noting that more huge rights
\nissues from listed private banks would come on stream in the near
\nfuture.<\/p>\n
In the pipeline are rights issues from Bank Internasional
\nIndonesia, Bank Lippo, Bank Niaga, Bank Universal, Bank Tiara
\nAsia and Bank PDFCI.<\/p>\n
Chang said share prices of those banking stocks were very low
\nnow, which would mean they would dictate fluctuations in the
\nindex if they floated huge number of rights shares.<\/p>\n
He believed it would be fair for JSX to reduce the weighting
\nof banking stocks in the composite index to reduce or eliminate
\nthe tendency.<\/p>\n
\"But in the future, when the banking sector improves and their
\nshare prices go up, they should increase the weighting. I think
\nthat is fair.\"<\/p>\n
If such an adjustment was not made, Chang said, fund managers
\nwould be forced to buy banking stocks to balance their portfolio
\nor abandon the composite index altogether.<\/p>\n
\"If not adjusted, fund managers perhaps will not use the
\ncomposite index to look at the market because the composite index
\nwill be very volatile. Therefore, they would have to look at
\nanother index, which may be the LQ-45.\"<\/p>\n
Research head at BNI Securities Adrian Rusmana contended that
\neven the LQ-45 would not suffice for fund managers' needs.<\/p>\n
Adrian also noted that adjustment to the current composite
\nindex would change its function to cover all transactions.<\/p>\n
He recommended the JSX create another index which would meet
\ninvestors' need.<\/p>\n
\"With those banking shares, the composite index does not
\nmirror the market anymore. Therefore, the JSX should consider
\nintroducing another index, which could be used as a benchmark.\"<\/p>\n
Chang disagreed with Adrian's suggestion for another index,
\narguing it would fail to attract fund managers.<\/p>\n
\"If they introduce another index, then we will have too many
\nindexes. If we have a lot of indexes, after a while nobody will
\nuse them and they will return to the composite index. Creating a
\nnew index is very easy, but if nobody uses it, what's the point?
\nIt will be useful for us to make adjustment,\" Chang said.<\/p>\n
Adrian responded the best solution in lieu of a new index
\nwould be to suspend trading on most banking shares, especially
\nthose undergoing government-sponsored recapitalization.<\/p>\n
\"Why not just suspend trading of those shares. They are mostly
\nempty shares, no significant fresh money injected into the bank.
\nThis manipulates the market,\" Adrian said. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/jsx-management-to-review-composite-index-criteria-1447893297",
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