JSX president hails proposal to allow banks to buy shares

JSX president hails proposal to allow banks to buy shares

JAKARTA (JP): Monetary authorities should allow banks to
invest a portion of their short-term funds in the capital market,
according to the Jakarta Stock Exchange President Hasan Zein
Mahmud.

"By investing part of the short-term funds in the capital
market, banks can increase their productivity," he was quoted by
Antara as saying yesterday in Semarang, Central Java.

Hasan explained there are times when banks have extensive
liquidity which would enable them to speculate on the stock
exchange.

He predicted that banks' activities on the stock exchange
would increase the role of domestic investors in the capital
market, which is still dominated by foreign investors.

Brokers, he said, are just like banks. They need funds and
facilities for their business operation.

"As local brokers are still financially small, they need
financial support. This can be provided by banks. But of course
credit for them should be limited," he said.

He pointed out that banks' investments on the stock exchanges
could be made through credit financing for securities companies
which then pass on the credits to their customers.

"For example, a bank gives a broker a credit worth 25 percent
of the total value of a share transaction. The other 75 percent
should be provided by the broker," he said, adding that this will
strongly encourage investors, particularly local investors, to
play the capital market.

He expressed optimism that in the next few years the capital
market will be able to beat banks as a source of funds.

"Banks will focus their business operation on getting fee-
based incomes, while non-bank financial institutions will
dominate the capital market," he noted. (13)