No limitation of foreign ownership in mutual funds
No limitation of foreign ownership in mutual funds
JAKARTA (JP): The government issued a decree yesterday
allowing foreign investors to buy 100 percent of mutual fund
shares listed on the local stock exchange.
The chairman of the Capital Market Supervisory Agency
(Bapepam), I Putu Gede Ary Suta, said that the change is
stipulated in one of the finance minister's capital market
decrees issued yesterday.
Increasing the foreign ownership ratio in listed mutual funds
to 100 percent will not enable foreign institutions to control
any particular fund, he said, because each investor in the mutual
fund is only allowed to buy a maximum of one percent of the
fund's total stocks.
He said that investors are limited to buying a maximum of one
percent of the mutual funds to prevent fund managers from going
bankrupt.
"If an open-end mutual fund is controlled by a single majority
shareholder, it can easily collapse, especially when the majority
shareholder redeems most of its stakes with the fund manager," he
said.
According to the new capital market law (article 19), a mutual
fund has to buy back its shares if a shareholder wants to return
the shares.
One of the decrees issued yesterday -- No.647/KMK.010/1995 --
also raises the foreign ownership portion in listed securities
companies to 85 percent from 49 percent previously. The easing of
foreign ownership in listed securities companies, however, is
limited only to non-financial institutions or individual
investors.
Bapepam also issued yesterday a number of regulations on
mutual funds, such as the procedure for licensing a mutual fund,
the operation of mutual fund as a limited company as well as a
collective-contract fund, the procedure of assessment, and the
statute of a mutual fund as a limited company.
Putu added that in the near future, the agency will invite the
top 20 securities companies to work out the best ways to
accelerate the establishment of open-end mutual funds.
Directors
The new regulations also include a new procedure for
nominating directors and commissioners on a stock exchange.
Putu said that candidates must be nominated by at least three
active members on the exchange, whose combined transaction value
must reach a minimum of 4 percent of the exchange's total
transaction value during the last 12 months.
The majority of each group nominating the candidates must be
comprised of local securities companies while each member of the
group must have a minimum of 0.2 percent of the exchange's total
transaction value.
Putu said, however, that all exchange members have the right
to elect the exchange's directors or commissioners even though
the nomination of the candidates can only be made by active
members.
Putu said that the regulation is designed to improve the
quality of the stock market's management and the professionalism
of the stock exchange's members.
"Our stock exchange activities should be based on a market
mechanism. Therefore, an exchange member should be able to meet
the market's demands," he said.
Putu denied the notion that the rulings would discourage the
participation of small brokerages, arguing that the regulations
would instead motivate them to be more active. (08)