JSX needs transparency, law enforcement: TSE
Rendi A. Witular, Jakarta
The Indonesian stock market needs to boost transparency and law enforcement in a bid to entice more investors and encourage more firms to list their shares on the bourse, a visiting top official of the Tokyo Stock Exchange (TSE) said.
Seiji Adachi, the chief strategist for Asian business and corporate planning at the TSE, said the Jakarta Stock Exchange (JSX) and the capital market regulator should advocate companies uphold transparency in order to gain foreign investors' trust.
"Transparency is the key now to expanding the (JSX) investor- base. Investors, especially those from overseas, don't want to invest in a market that is not transparent," Adachi said at a seminar on capital markets on Thursday.
He said the Indonesian Capital Market Supervisory Agency (Bapepam) should remove most of its regulations on corporate disclosure requirements and on the structure of the stock market in order to become a more user-driven market.
The government should speed up efforts to "demutualize" the JSX in order to instill a swift decision-making process at the bourse, revitalize each internal division of the bourse and improve communications with investors and listed companies, he said.
Demutualization is an attempt to transfer the control of the JSX to individuals or institutions that have no direct relation with the activity in the bourse. Currently, securities firms, which are also members of the bourse, own the JSX.
The management and commissioner of the JSX are also appointed from the membership of securities firms, making the bourse prone to conflicts of interest and these firms have a strong influence on market management and policy development.
The House of Representatives are presently deliberating a draft law on capital markets, which will pave the way for the demutualization of the JSX.
Adachi also highlighted the importance for the JSX and Bapepam to boost law enforcement in the markets.
"The Jakarta stock market has sufficient regulations already, but the point is how to enforce them. Such efforts should be supported by acts of government," Adachi said.
Critics have said Bapepam, which should be at the forefront of policing capital markets, has often ignored capital market rules and the principles of good governance.
This lack of law enforcement has meant few capital market violations have been brought to court and the watchdog has often taken the side of badly behaved companies when dealing with controversial cases.
Elsewhere, the JSX and the TSE signed a memorandum of understanding on Thursday to foster the securities markets in both Japan and Indonesia, and to help the further development of capital markets in the Asian region.
Under the agreement, the bourses will consult and cooperate on issues of mutual interest in order to strengthen the markets. They have also agreed to exchange beneficial information to maintain the efficiency and integrity of the markets.
Box Market size of Asian bourses (at the end of 2003)
Stock Market Trading Listed exchange capitalization value companies
(in million US$)
Domestic Foreign
Tokyo 2,953,098.3 2,108,732.1 2,174 32 Osaka 1,951,518.7 112,522.0 1,140 0 Hong Kong 714,597.4 296,155.9 1,027 10 Australia 585,431.0 371,970.4 1,405 66 Taiwan 379,060.4 591,717.6 669 5 Shanghai 360,106.3 255,964.7 780 0 South Korea 298,248.1 459,035.1 684 0 Kuala Lumpur 160,970.3 52,233.4 898 4 Shenzen 152,872.4 140,287.3 505 0 Singapore 148,502.6 91,928.2 475 76 Thailand 119,017.2 102,420.8 418 0 Jakarta 54,659.1 14,652.4 333 0 New Zealand 33,049.8 11,912.8 153 43 Philippines 23,190.5 2,762.6 234 2
Source: TSE