State firms must float shares locally

State firms must float shares locally

JAKARTA (JP): The Indonesian government should encourage
state-owned enterprises to carry out primary listing of their
shares on the local capital market, in order to build a local
investor base before floating stocks overseas, according to a
leading securities house.

"State-owned companies should also be used to develop the
local capital market, the Jakarta Stock Exchange, rather than
being spun off directly to New York or London or whatever,"
Phillip Tose, chairman of Hong Kong-based Peregrine Investment
Limited, told journalists at the house's office here yesterday.

The local flotation of major companies' shares could improve
the liquidity of the local capital market and encourage more
participation of domestic investors, said Tose, who was
accompanied by a group of executives from Peregrine's local
office.

Many analysts have said the local market has major potential
even though, in terms of liquidity, it is still inferior to the
other markets in the region.

According to the latest report, the trading volume of the
Jakarta Stock Exchange (JSX) reached Rp 25.45 trillion (about
US$11.56 billion) in 1994, while its total market capitalization
reached Rp 103.64 trillion.

Despite the impressive capitalization, various analysts noted
that foreign institutional investors still dominate the JSX,
carrying out about 80 percent of transactions.

Tose also said yesterday that, through the privatization of
the state firms, the government should develop in the local
market the ability to place American depository receipts or
global depository receipts on the international market, which
would guarantee the participation of multinational investors.

Bypass

"It is very important not to bypass the local
market...Foreigners and international institutional investors are
perfectly willing to buy shares in Indonesia," he said.

Indonesia plans to list shares in PT Telkom, the state-owned
domestic telecommunications operator, on the New York Stock
Exchange, the London Stock Exchange as well as on the JSX.

Last year the government managed to raise Rp 650 billion from
a dual listing of PT Indosat, which runs international
telecommunications services, on both the NYSE and the market
here.

Minister of Finance Mar'ie Muhammad said recently that other
major state companies, including the state electricity company
PLN and the state-owned tin mining company PT Tambang Timah,
would also follow on the path of Indosat.

"We believe that at the end of the day, it is the local
investors who will become the main long-term holders in large
state-owned enterprises," Tose said.

Tose's argument was supported yesterday by Timothy S. Gray,
the president of Peregrine's operation in Indonesia.

"Look at the case of Indosat. After a while the firm's shares
are more actively traded on the JSX than in New York," he said.

Gray also emphasized that on international bourses, investors'
attention spans tended to be very short because the number of
competitive companies listed was far greater than those on the
emerging markets.

Local listings, therefore, could serve as a sort of a buffer
to waning international attention as well as a means of
developing a local investor base, Gray said. (hdj)