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)