Price intervention just temporary measure: Bapepam

JAKARTA (JP): Chairman of the Capital Market Supervisory Agency (Bapepam) Bacelius Ruru said Saturday that the agency's price intervention is just a temporary measure.

He said the price intervention is aimed at protecting the investing public and that it will be removed when the market is more mature.

Bapepam limits prices of shares on the primary market to a maximum of 13 times the price earning ratios to protect the investing public from a high price dilution on the secondary market.

"The most important thing is how to promote the transparency in stock trading activities," Ruru said in a meeting with The Jakarta Post at his office.

During the meeting, Ruru made a correction on the Post's article on Bapepam's price intervention published on Saturday.

Bapepam has no plan at all to defend its price intervention policy, Ruru said, adding that price intervention in Indonesia, an emerging market, is imposed as a temporary remedy.

In his address at the end of a three-day international conference on the capital market Friday, Ruru said that an adequate legal framework is also essential to protect investors' interests.

"Furthermore, the market must be sufficiently transparent to ensure investors equal access to accurate material information," he said.

Accuracy

The Bapepam chairman said a company may legitimately raise capital from the public even for the most risky investment as long as full and accurate disclosure is provided.

By providing sufficient financial disclosure, it is believed that informed investors will be able to make competent investment decisions in accordance with their needs, he said.

Ruru said the shifting of the Indonesian capital market ruling from the so-called merit system to a disclosure system is also important in better protecting the investing public.

A disclosure system assumes that investors are able to make intelligent investment decisions if they are given sufficient and truthful information regarding public companies, he said.

"The disclosure system also assumes that investors need assistance from the government only in assuring that the information is available, not in evaluating the information," he said.

Ruru said that, in contrast, the merit regulation scheme is based on the assumption that investors lack the capability in making intelligent decisions on their own as to whether to buy, sell or hold securities.

The so-called disclosure system means to induce more mature and responsible markets by demanding diligence from market actors and professionals, he explained. (hen)