Securities firms and share issuers back JSX, SSX merger

JAKARTA (JP): The Association of Indonesian Securities Companies (APEI) and several listed companies said on Tuesday they supported the merger of the Jakarta and Surabaya stock exchanges.

They believed it was the best alternative to improve stock trading efficiency.

"Rather than having two wounded bourses in Indonesia, we had better have one efficient bourse," APEI's chairman Yannes Naibaho said at a capital market seminar sponsored by economic magazine Investor.

He acknowledged there was no guarantee that merging the two bourses would result in improved efficiency, but he said the move would at least provide a greater opportunity toward achieving the aim.

Analysts emphasize the country needs a more efficient bourse to attract foreign investors to help forge economic recovery.

The crisis-hit domestic economy and political instability have assailed the performance of Indonesian capital markets. The average trading value on the Jakarta Stock Exchange (JSX) dropped to between Rp 150 billion and Rp 200 billion from the precrisis Rp 500 billion.

The current average trading volume is even lower than the Rp 425 billion daily break-even level.

Activities on the Surabaya Stock Exchange (SSX), which trade the same companies, were subdued even before the crisis. At present, the average daily transaction value on the Surabaya bourse is about Rp 12.5 billion from Rp 43.7 billion in 1997.

Poor financial conditions of the listed companies and a significant decrease in trading volume on the two bourses should be factors to consider in deciding whether to merge the bourses, Yannes said.

President of listed PT Tambang Timah Erry Riyana endorsed the merger, saying it would reduce the burden of the listed firms.

He said that paying double listing fees for the bourses imposed a burden on listed companies, most of which are facing liquidity problems.

Other listed companies also complained that listing on the virtually inactive Surabaya bourse was a waste of funds because most investors conducted their transactions through the Jakarta market. The latter has opened remote trading facilities in the country's major cities to allow investors to conduct transactions from outside the capital.

In the early 1990s, companies listed on the JSX were allowed to trade their shares on the Surabaya market for free, but the policy ended following JSX's privatization in 1994. Now all companies have to pay listing fees to both bourses.

Although several companies have quit the Surabaya market, many others remain because of what sources termed an "unwritten requirement" from the Capital Market Supervisory Agency (Bapepam).

Erry said JSX could also open an additional trading board to facilitate activities of small companies or those which no longer met the listing requirement due to declining performance.

Former JSX and SSX presidents Hasan Zein Mahmud and Basjirudin Sarida opposed the merger.

"People are always talking about efficiency in terms of the internal conditions of JSX as a business entity. We should think of efficiency in terms of public service," Hasan said.

Hasan believed it would be better for SSX to change its priority to small and medium companies.

"The listing requirement should therefore be eased to enable small and medium companies to list their shares on the bourse," he said .

Basjirudin shared Hasan's view, saying that the merger should not be left solely to the bourse members' decision, but also to the government.

He criticized the government's hands-off policy on the merger plan.

"We all should not look at JSX and SSX only as business entities, but as the national financial institution which possesses oligopoly rights in the country's capital market."

He said the decision should not be left up to the bourses' members because their decision could be overly business-oriented.

JSX and SSX will hold their extraordinary shareholders general meeting between April 15 and April 23 to decide on the planned merger. (02)