Bapepam probes investors in alleged BCA manipulation case

Bapepam probes investors in alleged BCA manipulation case

JAKARTA (JP): The Capital Market Supervisory Agency (Bapepam)
said it had focused its investigation on stock investors of PT
Bank Central Asia (BCA), after it found indications of 20
security companies collaborating to manipulate the price of BCA
shares.

Bapepam chairman Herwidayatmo said on Wednesday that standard
operational procedures required the agency to examine all sides,
including stock investors.

"We examine documents and the first thing we look for are the
people behind the transactions," Herwidayatmo told reporters.

Securities companies, he said, carried out transaction orders,
thus cannot be singled out as the only suspects.

"Otherwise one may think bad of securities companies, as if
they are all dirty," he added.

Last week, Bapepam found indications of 20 securities firms
manipulating the price of BCA shares.

The findings were based on analysis of BCA share-trading
patterns covering 172 securities companies during the trading
period between May and mid July.

Bapepam found that between May 15 and June 12, a number of
securities companies had dominated the purchase of BCA shares,
causing its price to surge.

But the day after until June 29, the same securities companies
dominated the selling of BCA shares, driving its price down.

Based on its finding, Bapepam launched an investigation into
the suspected securities companies.

So far, Herwidayatmo went on, examination of eight securities
companies had been concluded.

He declined to reveal the results but promised to make them
public once Bapepam finished its investigation.

Those involved in the manipulation of share prices, face
prosecution with a penalty of up to Rp 15 billion and a jail term
of up to 10 years, Herwidayatmo said earlier. He was referring to
Article 91 of Law No. 8/1995 on capital markets.

Manipulating share prices normally requires the participation
of investors with large funding. The so-called market maker can
trigger a share of a certain company to rise, by purchasing the
shares in large quantities at one time.

This action can mislead retail investors into believing that
the company's shares will continue to rise.

Afraid of losing potential gains, retail investors then join
in buying the shares, at which time, however, the market maker
stops buying.

As retail investors pick up the buying frenzy, the price of
the company's shares continues to soar. It stops when the market
maker starts dumping the shares with the same force that it made
the purchases.

The suspicion that BCA share prices have been manipulated
comes at a time when the government is offering its 30 percent
stake through private placement.

The Indonesian Bank Restructuring Agency (IBRA), which is in
charge of the sale, has said it wanted bidders to submit a price
at a premium of BCA's share price in the stock market.

IBRA initially promised to announce the surviving bidders on
June 29, but it postponed the announcement.

Some analysts speculated that the postponement was because of
the suspicious drop in BCA's shares.

But IBRA said the postponement in the announcement was because
it wanted to pursue a "better price" for BCA's stake.

The agency has remained silent over the identity of the
bidders and at what stage the current tender process is at.(bkm)