Thu, 13 Oct 1994

No rise in foreign stake

JAKARTA (JP): The government is unlikely to raise the 49 percent limit for foreign investors' ownership of shares listed on domestic stock exchanges.

Yusuf Anwar, the secretary general of the Ministry of Finance, said here yesterday that raising the ownership ceiling as a favor to foreign investors could destabilize the country's monetary system.

"We are very much concerned about the inflows of short-term capital through stock markets," Yusuf said about the government's reasons in maintaining the policy.

Yusuf, speaking at the fourth congress of the Indonesia Financial Executive Association (IFEA) at the Shangri-La Hotel here, said that the capital inflows would be much more volatile if the foreign investors were allowed to buy more than 49 percent of listed stocks.

The threat of the short-term capital has also become the concern of other countries like Japan, the United States, Hong Kong and Taiwan, he argued.

"We may amend the foreign limit in the future," he said. "But give us a longer period of time to study all its impacts on our fledging capital market."

The widening of the foreign limit has been long awaited by stock market players. The existing ruling on foreign investment in listed shares is no longer consistent with regulations on direct investments, which allow foreign investors to have an equity holding of up to 100 percent in unlisted companies.

Yusuf said speculative trading on the capital market, which involves short-term foreign investment, has thus far been manageable.

"I hope the planned bill on the stock market will be able to cover preventive efforts against speculative moves," he told reporters after presenting his speech.(fhp/hen)