Capital market blueprint launched

Capital market blueprint launched

JAKARTA (JP): The Indonesian capital market aims to become the largest in Southeast Asia by 2020, 24 five years from now.

At least that is the optimistic scenario outlined in the country's capital market blueprint launched by the Capital Market Supervisory Agency (Bapepam) on Thursday.

The short-term targets stipulated in the 27-page blueprint includes the splitting of the stock depository and settlement agency into two separate institutions -- a central depository agency and a clearing and settlement agency. The central depository agency, which will hold all securities traded on local exchanges, will be set up before August this year, while the establishment of the clearing and settlement agency must be completed before 1997.

The blueprint does not, however, elaborate on the future of PT Kliring Deposit Efek Indonesia which at present, besides handling clearing and share settlement, also acts as a custodian agency for investors.

A number of banks currently operating as custodians for both their domestic and foreign clients are being encouraged to take part in the establishment of the planned central depository agency.

Bapepam chairman I Putu Gede Ary Suta said that procedures for the central depository agency are being hammered out. This includes the use of nominees as well as the ownership of shares.

Yet the blueprint does not examine the future of the stagnant Surabaya Stock Exchange (SSX), which in practice acts more like a branch of the Jakarta Stock Exchange (JSX) at the moment, rather than an independent stock exchange.

Other short-term objectives also include the introduction of a set of regulations to encourage the establishment of mutual funds and to boost their trading on the stock exchanges.

The planned regulations are expected to deal with the marketing of the products of mutual funds to investors on the primary market.

The improvement of public confidence in the country's capital market is also one of the objectives given in the blueprint.

There are many potential local investors but they are reluctant to enter the capital market for fear of being cheated by brokerage companies.

The negative image of the stock market is understandable, given the small size of the brokerage companies on the Jakarta and Surabaya stock exchanges.

Some brokerage companies do not only lack capital but are also poorly managed to boot.

To protect the investing public, the blueprint outlines a number of procedures for stricter supervision of brokerage companies and other capital market supporting agencies.

The introduction of the blueprint comes hot on the heels of the enactment of the Capital Market Law in January this year.

The newly introduced capital market law provides a stronger legal framework, not only to ensure fair trading but also to attract new domestic investors. (hen)