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)