JSX to become profit-oriented bourse

JSX to become profit-oriented bourse

The Jakarta Post, Jakarta

The capital market authorities are setting up a foundation to
gradually turn the Jakarta Stock Exchange (JSX) into a credible
bourse in Asia under a restructuring plan which will not only
change fundamentally the way the stock market is run, but may
also put weak securities firms out of business.

New JSX president Erry Firmansyah said that part of the plan
was turning the bourse from a non-profit institution into a
profit-oriented one to make money for the purchase of
sophisticated technology, which will be the main feature of the
industry in the future.

"To become a profit-oriented institution, we'll have to change
the bureaucratic culture here ... to improve our service" he told
The Jakarta Post in an interview last week.

The restructuring plan, which will also affect the smaller
Surabaya Stock Exchange (SSX), is currently being prepared
jointly by the Indonesian Capital Market Supervisory Agency
(Bapepam) and the Self Regulatory Organization (SRO) including
JSX, SSX, the custodian agency (KSEI), and the clearing agency
(KPEI).

It will be implemented next year once the House of
Representatives approves the new capital market bill at the end
of this year.

The market authorities will adopt a business concept
introduced in leading stock markets overseas.

Erry prefers to emulate Singapore where a holding company
controls the stock market and other related units.

Under this concept, the holding company is owned by public
investors.

Erry, however, opined that for the time being only certain
strategic investors should be allowed to own the shares.

"For now, I think the strategic investors should be local
investors. Foreigners can buy the shares when we go public later
on," he said, adding that each institutional investor should be
limited to a 3 percent to 5 percent stake.

Strengthening the structure of the stock market is crucial to
allow the bourse to contribute significantly in pushing economic
growth in the future.

Erry said that the Jakarta stock market had the potential to
become a leading market in the region, matching that of the
Singapore Stock Exchange, with a large pool of companies ready to
go public and a huge population of potential investors.

He pointed out that according to one study, Indonesia has some
3.5 million population with an annual income which matches the
level in Singapore.

"We want to become a leading and credible bourse in the
region. We have a huge potential," he said, adding that the
restructuring of the stock market would be his top priority in
his three-year term.

The restructuring of the stock market, however, could force
weak securities firms to be out of business.

Erry admitted that the authorities will force securities firms
to have a stronger capital base in a bid to boost confidence in
the industry.

The minimum capital base for securities firms is currently set
at Rp 5 billion (about US$544 thousand).

Erry could not say how much the new minimum capital
requirement would be. "It's still being discussed."

"To gain trust and to be able to compete in the future,
securities firms must have strong capital, strong human
resources, and good infrastructure," he said.

Currently, there are some 180 securities firms which are
members of JSX, and according to Erry, 50 percent are actually
already in critical condition: not making any profit and have
negative equity.

He, however, said that the authorities are seeking ways on how
to help the weaker firms including through a merger option with
stronger firms or to encourage them to engage in aggressive
marketing campaigns.

The Jakarta stock market has been one of the best performing
markets in the region, with the composite index posting gains of
nearly 40 percent this year.

Erry was optimistic that the index would continue to rise.
The index was at 531.58 on Friday.

He pointed out that local and foreign brokers were predicting
the index to reach around 600 points by year's end.

He said that the JSX was targeting some 40 companies to be
listed in 2002, of which 10 had been listed.