Brokers want clear-cut ruling on stocks value

JAKARTA (JP): The association of brokerage companies called on the stock market authorities yesterday to issue a clear-cut guideline regarding the par (nominal) value of shares listed on domestic exchanges.

Achmad Sofjan, the chairman of the Jakarta Securities Brokers Club, said that the sales of shares with different par value at the same place could, in the long run, cause a market distortion.

"There should be a limitation so that all stocks will be treated the same," he told The Jakarta Post while commenting on media reports about the plan of several large capitalized companies to split their stocks by halving their par value to Rp 500 (22.88 U.S. cents) from Rp 1,000.

The share split move emerged following the listing of the state-owned Indosat's shares on the Jakarta and Surabaya stock exchanges. The par value of Indosat's shares are set at Rp 500 each, while those of other shares on the two markets are all fixed at Rp 1,000.

The market authorities denied that it was a special privilege given to Indosat, which is also listed on the New York Stock Exchange (NYSE).

Hasan Zein Machmud, the president of the Jakarta Stock Exchange (JSX), said there is no regulation requiring issuing companies to set the par value of their shares at Rp 1,000 each and the fact that all listed companies, except Indosat, have a par value of Rp 1,000, is just coincidental.

Double

Sofjan, also an executive of Merincorp Securindo, said that if issuing companies change the nominal value of their shares to Rp 500 from Rp 1,000, it will double their issued shares. "As a consequence, the share price will automatically drop also by 50 percent in line with the 50 percent cut in their nominal value," he said.

The lower prices would give investors more of a chance in having higher investment returns, he said. But he added that the promising prospect could encourage all companies to do the same, or even set their nominal value even lower than Rp 500.

"The listing of shares at different par values will, therefore, make the market very complicated," he said, adding that it could create the impression that the Indonesian exchanges are poorly managed.

Other securities analysts said, however, that the share split through the cut in the shares' nominal value would cause no harm to either the investing public or the market mechanism.

"Besides improving the liquidity, the share split, which automatically lowers share prices, would involve more individual buyers," said a securities analyst of a local brokerage firm. (hen)