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)