JSX needs transparency, law enforcement: TSE

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