Wed, 07 Sep 1994

RI seeks to become SE Asia's largest stock mart by 2000

JAKARTA (JP): The Indonesian capital market can become the largest in Southeast Asia by the year 2000, given the present upward trend in stock exchange activities, says an official.

Bacelius Ruru, chairman of the Capital Market Supervisory Agency (Bapepam), said yesterday that in terms of trading volume, the Indonesian capital market remains the smallest in Asian countries despite the remarkable progress of the last five years.

However, a characteristic of emerging markets, like Indonesia, is that once a critical stage is reached, the growth can be extremely fast, he said.

"The present daily trading volume of US$10 billion could increase 10-fold in a few years to US$100 billion before the year 2000," he told an investment symposium held within the framework of the 25th anniversary of Deutsche Bank's presence in the country.

He said the 10-fold increase in trading volume would make Indonesia the largest capital market in Southeast Asia.

A similar growth rate was recorded by Taiwan in the 1986-88 period and by Malaysia in the period between 1991 and 1993.

Based on the current trends and programs already in place, the country's stock exchanges will all operate automated and book entry settlement systems that will be linked by satellite to cities both across the archipelago and abroad, he said.

Efficiency

"Settlement will be efficient, dependable and fast," he said about the Indonesian market.

The market will have a diverse range of products, active bond markets, an option market as well as a distribution network for open-end mutual funds.

In addition, Ruru said, the quality and speed of disclosure of information about securities ties will be improved considerably.

Enforcement of market regulations will increase substantially and the market will enjoy a high degree of investor confidence, he said.

The Indonesian capital market has undergone a remarkable transformation since 1989. The number of listed companies on the Jakarta Stock Exchange (JSX), for example, has grown from two dozen in 1987 to 188 at present, with market capitalization rising more than 80 times to Rp 79.5 trillion (US$37.85 billion).

Ruru said that the promising prospect has attracted foreign equity investment worth some $4 billion into the country.

He acknowledged, however, that stock trading activities are still dominated by foreign investors due to the small number of domestic buyers.

He estimated that the number of domestic investors would surpass their foreign counterparts in the next five years as the result of the government's intensive program to expand retail trading.(hen)