JSX expects 30 new IPOs next year

JAKARTA (JP): The Jakarta Stock Exchange (JSX) is expecting 30 new listings next year up from 21 this year, as more companies launch initial public offerings (IPO) to capitalize on a recovering stock market.

Of the 30 companies to float their shares, JSX expects 20 small to midsize companies, and 10 large companies.

The exchange did not estimate the amount of capital that might be raised through the IPOs.

But JSX president Mas Achmad Daniri expressed confidence that the stock market would rebound next year, after having lost some 70 percent of its value this year.

He said that the daily average transaction value would reach Rp 650 billion (about US$64.84 million) up from Rp 550 billion this year.

Asked about the assumption behind JSX targets, Daniri answered that it was the return of foreign stock investors.

"We hope that they (foreign investors) will return, when the government privatizes some of its assets under IBRA (the Indonesian Bank Restructuring Agency) through the stock market," Daniri told The Jakarta Post.

Aside from improving Indonesia's overall investment climate, the divestment of state enterprises in the stock market would act as a sweetener to lure in foreign investment, he said.

Foreign investors made up only 20 percent of this year's total transactions value, down from 35 percent last year.

The drop in foreign investors is widely seen as the main reason of JSX's hefty decline.

Its composite index fell from a peak of 700 points in January to an average of 400 points near the end of the year.

Daniri said the return of foreign investors would boost JSX's performance, since local investors consisted mostly of retail clients.

But he declined to estimate how the proportions between foreign and local investors might look next year.

There was no ideal proportion, he said, adding: "We're in a transition period, where local investors are becoming stronger."

But the recent change of Morgan Stanley Capital International's (MSCI) index rating method might discourage foreign stock investors to return to Indonesia.

MSCI said it would adopt a free float rating method that would rate stock market indexes by the percentage of shares available for transaction in the stock market. The shares controlled by the public companies' founders are not considered to be liquid.

Indonesia's rate of free floating shares is known to be low, 30 percent to 40 percent on average. Founders or the government own the majority interests in most publicly listed companies.

Analysts have warned that Indonesia would become even less attractive to foreign investors because of its low free float rate.

MSCI plans to apply the new method for its widely followed index rating next year.

Daniri said that JSX and the Capital Market Supervisory Agency (Bapepam) would meet MSCI to have a better understanding of its new rating method.

But he added that this was the right timing for the government to unload its assets under IBRA in the stock market.

He also said that MSCI wanted to encourage companies listed on stock markets to improvement their corporate governance.

By diversifying the ownership to the public, the need for more prudent management will rise, Daniri said. (bkm)