Local firms delay floating shares

Local firms delay floating shares

JAKARTA (JP): Most companies planning to float their shares on the local capital market this year are likely to delay their initial public offerings (IPOs) due the prevailing weak sentiment.

Victor W. Wong, an analyst of DBS Securities, yesterday described the current market sentiment as a real bad time for new issues.

"The market is expected to recover in the third quarter but new share issuers still need another two or three months to prepare their stock offering," he said. "It means they have to hold on until next year."

Sources said that at least 50 companies have received the green light from the Capital Market Supervisory Agency to float new shares through the local market. Around half of them scheduled their IPOs in the January-April period but only three companies carried out their plans according to schedule.

The delayed IPOs include those of Budi Acid Jaya, a chemical firm, Perdana Bangun Pusaka, the sole agent of Japan's Konica film, and Mustika Ratu, a manufacturer of health and beauty products. The three companies originally set March and April as their offering dates.

Some other companies such as Lippo Village, Marga Mandala Sakti, Nusa Bank, Rasindo Group, Ria Star, Indo Prima Gemilang, Sinar Angkasa Rungkut, Unibank and Wonokoyo Jaya Group, are also expected to delay their IPOs to avoid direct competition with PT Telkom, the state-owned domestic telecommunications company which is expected to become the largest issue in the country's capital market history.

Sources said that Telkom expects to raise funds of around US$1 billion from its IPO by the end of this year, with around 40 percent of the funds to be raised through the local capital market and the remainder through New York and London stock markets.

Reason

Wong cited liquidity problems as the main reason for delaying the new issues.

The volatility of the U.S. and Japanese currencies is the main reason for the sluggish market.

He said that the volatility in the two currencies had caused a pullout of portfolio investments from Indonesia and other Asian countries.

Indonesia, with its large yen-dominated loans, is on the watch list of most of the world's investment fund managers. "They fear that the rising yen could negatively affect the country's foreign exchange reserves," he said.

Wong said that domestic factors, such as the upward trend in interest rates, are also part of the reason behind the exchange's bearish condition.

Wong and other securities analysts estimated that the weak sentiment would recover in the third of quarter in line with the improvement in the world's monetary system.

"But the appetite for new shares will remain relatively low and the demand will be placed on a selective basis," said FT Chong, a securities analyst at Bank Dagang Nasional Indonesia.

In the secondary market, investors will place buy orders only for cheap stocks, while on the primary market they will select shares of "big capitalized companies," he said.

Both Wong and Chong estimated PT Telkom's shares will become a prime choice of both local and foreign investors.

"Most major fund managers are waiting for Telkom and other big-capitalized share issuers," he said, indicating that small- capitalized companies would receive a low subscription if they do not carefully reschedule their offering dates.

There were only three companies newly listed on the Jakarta Stock Exchange (JSX) in the January-April period, less than one- third of those listed in the same period last year. In 1994, the number of new listings on the local exchange reached 49 as compared to 19 in 1993. (hen)