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)