Bapepam keeps hands off JSX-SSX merger plan

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.
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