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)