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)