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.