Bapepam is seeking measures to improve stock liquidity
JAKARTA (JP): Chairman of the Capital Market Supervisory Agency (Bapepam) Bacelius Ruru said here yesterday that his agency would impose stricter measures to improve the liquidity of stock trading on local markets.
He said that Bapepam would also ask local stock exchanges to introduce stricter listing requirements so that only companies with a significant number of shareholders would be listed.
Ruru said that the poor liquidity of the Indonesian stock market has caused concern and that measures should be taken to deal with it so that investors will not move to more liquid markets overseas.
Ruru said Bapepam will require new issuers and their managing underwriters to present records promising that their shares will be liquid on the secondary market.
"Such records might be in the form of underwriting and share distribution contracts that call for placement to 1,000 or more shares in lots of 500 or more," he told local and foreign executives at the Mercantile Club's monthly business luncheon.
At least 82 shares traded on the Jakarta Stock Exchanges (JSX) are considered illiquid, meaning that around 45 percent of listed shares can not be bought and sold easily. Some 38 of these illiquid stocks often do not record any transactions during a month.
Ruru said that the listing rulings of the stock exchanges were still too loose, especially those related to the number of shareholders in each listed firm.
"The rules of the JSX only require an issuer to have 200 round-lot shareholders," he said, adding that it is not, therefore, surprising that seventy-five issues on the market have less than 250 shareholders and that only 12 companies have more than 2,000 shareholders.
Difficult
A securities analyst said that it will be difficult for both stock exchanges and Bapepam to improve the number of shareholders if no measure is taken to reduce the number of stocks in each transaction unit (the round lot), 500 at present.
"The buying power of individual investors here is still low and it will, therefore, be very expensive for them to buy even a single round lot," he said.
The JSX has, in fact, introduced an odd lot system for the transaction of shares of less than 500. But it is not so popular since it involves a small number of investors.
Ruru said that stock exchanges have to impose a stricter listing ruling related to the minimum number of shareholders in order to deal with the poor liquidity problem.
The fact that a registration statement has been submitted to Bapepam and that it has become effective is not sufficient to justify a listing, especially if the exchange believes that the shares will not be actively traded, Ruru said.
He also called on the stock exchanges to divide listed shares into two or more trading boards based on their liquidity.
Another possible measure, he said, is to grant issuers with more than 2,000 shareholders a discount on an annual listing fee.
"This will become a good incentive to encourage other companies to increase the number of shareholders and resolve the liquidity problem," he said.(hen)