JSX rules out limiting the listing of new shares

JSX rules out limiting the listing of new shares

JAKARTA (JP): Hasan Zein Mahmud, the president of the Jakarta
Stock Exchange (JSX), yesterday ruled out limiting the listing of
new shares on the market to stop continued falls in stock prices.

"I believe in the market mechanism and any market intervention
will sooner or later create trading distortions," Hasan said.

A number of capital market players and analysts have called on
the Capital Market Supervisory Agency (Bapepam) and the JSX to
limit new listings to reduce the market glut, which has caused
continued falls in share prices in the last three months.

Hasan blamed the rise in the U.S. interest rates for the
trading slump.

"The falls in share prices are caused more by the rise in U.S.
interest rates rather than the increase in the share supply," he
said.

He said the net inflow of offshore capital to the JSX began
falling in February when the U.S. Federal Reserve raised interest
rates.

"The inflow of foreign capital further declined when the Fed
announced another rise in March," Hasan said, adding that the
drop in the foreign capital is really sensitive for JSX trading
activities, which are still dominated by foreign investors.

"The 0.5 percent rise in interest rates means nothing to most
of us. But for fund managers, it could mean large profits," he
said.

Index

The JSX Composite Index broke 600 points in the first week of
January for the first time since April 1990 before falling back
in the following weeks. The index has continued weakening since
the rise in the U.S. interest rates in early February.

The index further dropped yesterday to close at 480.95, the
lowest level since October last year.

Hasan acknowledged that an increase in the number of new
listings in the last three months has also partly caused a
decline in trading activities but he said that a cut in new
listings would not effectively solve the market slump problem.

He said it is also unnecessary for Bapepam to reschedule the
initial public offering plans of a number of companies, which are
now in the waiting list.

"Let them work in line with the market mechanism.... I am sure
companies would cancel their go-public plans themselves if the
demand on the primary market continued weakening," he said.

Hasan said the falls in the share prices here are in line with
the downward trend on international capital markets such as New
York, London, Tokyo, Hong Kong, Singapore and Kuala Lumpur.

"The JSX is still better than those markets. Its Composite
Index lost only around 20 percent, as compared to more than 25
percent suffered by the world's major markets," he said.

At least 10 companies have launched their initial public
offering since January this year. According to informed sources,
50 other companies are now waiting for approval from Bapepam to
go public. (hen)