Surabaya bourse prepares plan to find own identity
Surabaya bourse prepares plan to find own identity
JAKARTA (JP): The Surabaya Stock Exchange (SSX), which at present acts more as a trading arm of its rival, the Jakarta Stock Exchange, is wrestling to find its own identity.
A new business strategy, with emphasis on widening the local- investor base and attracting local companies to list their shares on the market, is being prepared.
"Coordination with capital market supporting agencies will also be improved to fulfill the target of becoming an independent stock exchange," Isakayoga Cakra Hudamara, the newly elected chairman of the bourse, announced recently.
The promise to turn the SSX into a more independent market is, in fact, not new at all. However this time, it is, at least, conveyed to lessen growing criticism over the bourse's future.
The SSX has operated for almost seven years but its activities still rely much on a "subsidy" given by companies listed on the Jakarta Stock Exchange (JSX).
It might be the reason why many investors and those who care about the development of the country's capital market are more critical when asking about the its future.
Some of them question the logic of maintaining its operation. Others want the Surabaya exchange merged with the JSX.
"I think it is no longer relevant to maintain the operation of the Surabaya exchange. It is economically unviable," a noted securities analyst told The Jakarta Post.
He said the SSX is able to survive only because of the "undisguised subsidy" from companies listed on the JSX.
He may possibly be right because it is an open secret that almost all companies listed on the JSX are "obliged" to cross- list their shares on the SSX. Without such an unwritten instruction, the Surabaya bourse could not exist.
The SSX was established in 1989 as the first private stock exchange operator in the country. It was to cater to the growing number of small and medium-scale companies in the region and to give capital market access to local investors.
To support the idea, the Capital Market Supervisory Agency (Bapepam) -- which during that time still directly managed the JSX -- required all companies listed on the JSX to cross-list their shares on the newly established Surabaya market.
The double listing facility, which was initially to be only on a temporary basis to support the baby bourse, was extended even though the JSX was privatized in 1992. The extension of the double listing requirement created more financial and administrative burdens to share issuers because, unlike previously, they had to pay for additional listing costs.
For share issuers, cross-listing on the SSX is not economically viable at all, given the small number of local investors. In fact, around 70 percent of the transactions made on the SSX takes place in its Jakarta office.
Out of the 199 firms listed on the SSX, 189 come from the Jakarta stock market. The remaining 10 companies originated from the dissolved over-the-counter market or those, which are no longer qualified for the JSX.
Client-firms
It shows that the SSX has failed to generate any client-firms during its seven years of operation, except a number of bond issuers.
"If we had options, we would not list our shares on the SSX. As you know, stock trading there has been practically dormant all the time," a corporate secretary of a listed company said.
The fact that around 70 percent of the share transactions on the SSX were made through its Jakarta trading office gives the clear impression that without the helping hand of its Jakarta share issuers and buyers, the SSX would be unable to survive.
Trading activities on the SSX are mostly in the form of cross- transactions, deals done outside the trading floor which are generally conducted by institutional investors. Other transaction activities, such as those made through auctions or over-the-counter dealings, remain inactive as investors prefer to deal with more the active and fluid JSX despite the lower transaction fees offered by the SSX.
The weekly trading volume of the SSX totaled only around 70.38 million shares late last month, less than 10 percent of the weekly trading volume of 716.03 million shares booked by the JSX in the same week.
"The JSX and SSX not only have the same shares to sell but also have similar buyers. So why should we separate them?" another analyst queried.
Basiruddin A. Sarida, one of the founders and a former president of the SSX, argued that the operation of the SSX should not be narrowly based on business logic.
"There is more important things than that...the image of the country," he said. "Moreover, a big country like Indonesia should have more than one stock market."
His vision of having a regional bourse is brilliant, but to make the SSX viable is another matter. Basiruddin, who was at the helm of the bourse for nearly seven years, proved that to fulfill his dream would be an uphill battle. (hen)