Govt advised to float ADRs rather than shares overseas

Govt advised to float ADRs rather than shares overseas

JAKARTA (JP): Securities analysts and capital market players
have suggested that the government float depository receipts of
state companies rather than their equity stocks in its overseas
listing program.

"Using American depository receipts (ADRs) will minimize legal
problems which often arise in listing a company in the United
States," Tito Sulistio, the president of PT Penta Sena
Securities.

An ADR is a negotiable certificate issued by a U.S. bank for
shares issued by a foreign corporation. The depository receipts,
which are held in a custodial account either at the issuing bank
or with an agent, are registered with the U.S. Securities and
Exchange Commission and are traded on local stock exchanges. The
receipts essentially give the holder the same benefits as
shareholders while avoiding the complicated procedures that are
necessary for a foreign company to issue stock in the U.S..

Securities analysts say that, besides the less complicated
procedures, the listing of ADRs will also benefit local investors
and stock exchanges -- as long as the company listed stock on the
JSX at the same time. The government hopes that this will give
them the best of both worlds, allowing access to the American
capital markets, while pumping up the volume of the JSX.

"Most of developing countries use this instrument in tapping
investment funds in the U.S. capital market," said Tito, also a
member of the Supervisory Board of the Jakarta Stock Exchange
(JSX).

The government plans to float the shares of at least 10 of its
corporations overseas under its privatization program and PT
Indosat, the international telecommunication company, is now
being groomed to be the first company to go this route.

The government has yet to decide where Indosat will be listed
but an informed source said that it will be listed on the New
York Stock Exchange.

Voting rights

Tito said another benefit in listing ADRs is that the
government can impose certain arrangements to limit voting rights
of the depository receipt holders. These limitations on voting
rights will prevent the control of the company from falling into
the hands of foreign investors.

However, the government's plan to float state corporations'
shares on overseas stock markets has been widely criticized by
some local market players, who want the companies stock to be
sold exclusively on the JSX.

PT Semen Gresik is the only state-owned company listed on the
local market at present. With the listing of larger state
corporations such as PT Indosat, PT Telkom, the domestic
telecommunication service, subsidiaries of PT PLN electricity
corporation and the national airline Garuda Indonesia, experts
feel that JSX has the potential to be the largest stock market in
Southeast Asia. (hen)