Bapepam keeps hands off JSX-SSX merger plan

JAKARTA (JP): Capital Market Supervisory Agency (Bapepam) officials are keeping their hands off plans to merge the Jakarta and Surabaya stock exchanges.

Head of Bapepam's legal bureau I. Nyoman Tjager said on Monday that the question of whether Indonesia should have just one bourse instead of the current two, for efficiency, is up to the members of the two bourses.

"We can only suggest that the current economic situation and other aspects be taken into account in deciding whether Indonesia needs one or two bourses," Nyoman said at seminar on the capital market.

He reminded the audience that no country in the world has a law requiring a set number of stock markets.

The seminar, titled "The Ideal Profile of the Jakarta Stock Exchange (JSX) Management Approaching the Third Millennium", was sponsored by economic magazines Investor and Jurnal and daily business newspaper Bisnis Indonesia.

The management of JSX and Surabaya Stock Exchange (SSX) agreed in November 1998 to form a special team to investigate a possible merger.

The team is chaired by the president of bourse member PT Trimegah Securitas Avi Yasa Dwipayana, with members representing 13 other members of both the Jakarta and Surabaya stock exchanges

In its final report, the team recommended the two exchanges be united either through merger or acquisition to improve efficiency in the country's equity market operation.

According to the team, an acquisition by JSX might be the best option in uniting the two bourses.

The report recommended that JSX acquire 10 percent of SSX's productive assets. Afterwards, the remaining 90 percent of SSX assets are liquidated.

According to the recommendation, JSX would be required to employ all current employees of SSX in the new JSX. However, an independent consultant would be appointed to help reduce the employees to the level required by the adjusted workload.

The team's final report was submitted in March to all parties concerned.

According to officials from both JSX and SSX, the team's acquisition recommendation will be discussed for approval in shareholder meetings for the two bourses on April 23 and April 15.

Anton Natakoesoemah, a finance director at SSX, told The Jakarta Post the acquisition plan would put an additional burden on JSX.

"The Jakarta Stock Exchange itself needs internal restructuring. Why add the burden of having to acquire the Surabaya Stock Exchange?"

According to Anton, JSX is already overstaffed. He said 150 of the 300 employees are not actually needed.

Anton said JSX daily transactions are now between Rp 150 billion and Rp 200 billion, whereas the break-even level is Rp 425 billion worth of transactions every day.

"If the assumed Rp 200 billion daily transaction level continues, the JSX will have to cover an annual loss of Rp 18 billion," he said.

However, many analysts agree to combining the operations of JSX and SSX for the sake of efficiency.

As the only two exchanges in the country, JSX and SSX trade the same companies, but many listed companies have complained that listing in the virtually inactive Surabaya market was simply a waste of money.

Most firms prefer to list their shares only on the JSX, but are required by the capital market authority to also list their shares on the Surabaya bourse.

David Cheng of PT Trimegah Securindo agrees that the two stock exchanges be combined to be more efficient.

"Unless we are growing, we do not need two stock exchanges in Indonesia. When it comes to stock trading, we only think of JSX, never SSX," he said.

He also suggested that Indonesia have one bourse with a two board system. The first board would be list only sound companies, and the other would be for less sound ones.

Ferry Hartoyo of PT Vickers Ballas Tamara said that having one bourse would cut operational costs. "It is good for the investors, the bourse members and the government," he said.

Ferry said that with current technology, a bourse actually does not need a physical form.

"Traders should not have to come to the bourse to trade. They should be able to trade stocks and settle payments electronically from their own office anywhere around the world," Ferry said. (02)