Suspension of Sun Hung hailed
Suspension of Sun Hung hailed
JAKARTA (JP): Indonesia's Association of Publicly-Listed Companies yesterday hailed the suspension of securities firm PT Sun Hung Kai from capital market activities, saying the move was right in terms of ensuring fair play in the sector.
Association Secretary-General Koesnadi Kuyono said the suspension of PT Sun Hung Kai by the Capital Market Supervisory Agency (Bapepam) bodes well for the future of the Indonesian capital market.
"Bapepam has no choice but to suspend the defiant underwriter if it wants to protect share issuers," Koesnadi told The Jakarta Post.
Bapepam temporarily suspended Sun Hung Kai from underwriting and stock broking activities on Thursday without saying why it had done so.
But sources said that the penalty had been imposed because of the securities firm's failure to settle all the public offering proceeds of PT Miwon Indonesia, a major seasoning producer.
Miwon, a South Korean joint venture, offered about 25 million new shares during its recent initial public offering but the shares were poorly subscribed.
Sun Hung Kai, also about 80 percent owned by a South Korean firm, acted as the main underwriter of Miwon's public offering on a full commitment basis. Under such a contract, the underwriter should have bought all the unsold shares.
In addition, Bapepam temporarily suspend the work permits of six executives of the securities company.
L.G. Rompas, an executive of PT Inter Pacific Securities, also welcomed Bapepam's decision, saying that the move was a good lesson for Indonesian underwriting companies.
"Underwriters should be more realistic. They should refrain from making a deal if they cannot fully bear the possible risks," he told the Post.
He said that Bapepam's disciplinary measure against the South Korean joint venture indicated a stronger commitment on Bapepam's part to protecting both the investing public and share issuers.
However, Rompas, a former chairman of the association of underwriting companies, expressed concern over Bapepam's decision to suspend the work permits of the six Sun Hung Kai executives.
He said that the suspension of the work permits was not completely acceptable, saying that Sun Hung Kai's failure to settle the public offering proceeds was purely the result of the company's financial weakness and not due to any lack of professionalism on the part of the company's executives.
"That's why it is important for Bapepam to reconsider the revocation of professional permits in the future," he said.
He said Sun Hung Kai's suspension also indicates weakness in the country's stock underwriting industry, not only in terms of financial capacity, but also in terms of the underwriting mechanism.
Rompas said the paid-up capital requirements for both local and foreign joint-venture securities firms are no longer adequate to back up their operations in the growing market.
"Bapepam should consider raising them so that they will have enough funds to bear possible risks," he said.
At present, the minimum paid-up capital required for a securities firm is only Rp 10 billion (US$4.36 million) for a foreign joint venture and Rp 5 billion for a domestic company.
Bapepam recently required domestic securities firms to gradually raise their paid-up capital by 100 percent over three years.
Rompas said that a full-commitment basis for underwriting contracts between securities firms and share issuers is no longer appropriate, given the growing uncertainty in the market.
"It is very risky to take up a full commitment contract because the market is now getting more unpredictable," he said. (hen)