Standardization of share's par value not yet essential: JSX
Standardization of share's par value not yet essential: JSX
JAKARTA (JP): The president of the Jakarta Stock Exchange
(JSX), Hasan Zein Machmud, ruled out here yesterday the
possibility of standardizing the nominal value of ordinary shares
listed on the market.
"I don't think there is a crucial need to issue a ruling on
the par value of shares," he said while responding to recent
suggestions on the need for regulating the par (nominal) value of
listed shares.
Hasan said that share issuers are free to set the nominal
value of their ordinary shares as the difference in the face
value would bring no harm to the market mechanism.
"It is up to investors. They can choose any stocks which can
give them higher returns," he told The Jakarta Post following the
opening of a one-day portfolio investment clinic at the Shangri-
La Hotel.
Issues regarding the nominal value have been widely debated in
the media following the listing of Indosat shares on local
exchanges. The par value of Indosat's shares are set at Rp 500
(22.88 U.S. cents) each, while those of other shares remain at Rp
1,000.
A number of listed companies have expressed their intention to
follow suit, some planning to halve the par value of their shares
to Rp 500 and others even lower to Rp 100.
The cut in the par value, also called a share split, will
increase the total number of the issued shares but share prices
will automatically decline at the same percentage of the rise in
the number of the shares.
Many securities see such a share split as a positive maneuver
to improve the trading liquidity as the cut in the price will
normally attract more buyers.
Opposition
The association of securities brokers, however, opposed the
move and asked the market authority to issue firm guidelines
about the nominal value standard so that share issuers will have
a limit when fixing the face value of their shares.
Achmad Sofjan, the chairman of the Jakarta Securities Brokers
Club, said that the sales of shares with different par values
could cause a market distortion.
The system of the JSX's bidding limit, which is set at a
minimum level of Rp 25 and maximum level of Rp 200 in each
transaction, will bring more benefits to shares with lower prices
rather than if the bidding increment were set in percentage
points.
"The system will encourage listed companies to set their
nominal value as low as they can and if it happens, the market
will become very complicated," he said.
Hasan, however, dismissed the possibility of such a negative
impact.
"I don't think issuers of shares with low prices will split
their stocks. It is not necessary," he said.
Yesterday's portfolio investment clinic is part of the JSX's
routine program in promoting the capital market to the public.
Felia Salim, the director for research and development, said
that the JSX will hold a similar event in Semarang early next
month and in other cities, including Medan of North Sumatra,
early next year.
She said that the clinic provides free consultation services
both for individuals and institutions not only about how to buy
stocks but also to tell companies about the positive impact of
selling shares to the public through the capital market.(hen)