U.S. firm faces probe over alleged insider trading
Dadan Wijaksana, The Jakarta Post, Jakarta
The Capital Market Supervisory Agency (Bapepam) said on Wednesday it was investigating possible insider trading by U.S. investment firm Merrill Lynch during last week's sale of shares in state- owned international call operator PT Indosat.
".. an investigating team has been established in respect of the (alleged illegal trading of) Indosat shares.
"The team is now gathering data to determine whether improper trading has occurred," Bapepam Chairman Herwidayatmo said on Wednesday on the sidelines of a hearing with the House of Representatives.
The investigation would be centered on the massive sell-off of the company's shares on Thursday by the U.S. brokerage house.
State Minister for State Enterprises Laksamana Sukardi said on Wednesday that Merrill Lynch could be suspected of insider trading as it was also acting as financial advisor for a planned Indosat rights issue.
"Last time when we wanted to divest there was a huge sell-off, 40 percent or some 4 million shares, which was done by Merrill Lynch," Laksamana said.
"I think we need to analyze that. (Merrill Lynch) is also a financial advisor for Indosat's five percent rights issue plan. This shows a conflict of interest, even the possibility of insider trading".
The sell-off by Merrill Lynch, which took place ahead of the government's plan to divest an 11.32 percent stake in Indosat via a private placement, help send the share price of Indosat down by nearly 5 percent before the Jakarta Stock Exchange suspended trading over the counter pending clarification from the government on the divestment plan.
The divestment program itself was a disappointment as the government could only sell an 8.1 percent stake last week at a price of Rp 12,000 per share, lower than the price level of Rp 12,600 before the trading suspension.
Merrill wasn't involved in the private placement, which was jointly carried out by Credit Suisse First Boston and state-owned Danareksa Securities.
Indosat resumed trading at the start of the week and ended down 1.24 percent at Rp 11,900 on Wednesday.
Meanwhile, Reuters quoted a Merrill Lynch official in Jakarta as saying that the company had not been contacted by Bapepam, but that it would comply with any inquiry.
"There was nothing unusual in the sale of Indosat shares. Merrill Lynch has the data and is ready to be investigated," Lily Widjaja, the chief financial officer, was quoted as saying.
According to Bloomberg, a couple of large firms, including ABN Amro and JP Morgan, were net sellers of Indosat shares during the day in question.
These firms, which included Merril Lynch, may have sold the shares at the request of their clients.
Some said that the probe into Merrill Lynch was mainly triggered by the disappointing results of the poorly managed Indosat divestment program.
The government is planning to sell a 45 percent stake in Indosat this year as part of the privatization program aimed at raising some Rp 6.5 trillion in cash to help finance the state budget deficit.
Among Thursday's big sellers of Indosat shares: Merrill Lynch Indonesia (4,14 million shares), ABN Amro Asia Securities (1,30 million shares), JP Morgan Securities (1,22 million shares), Vickers Ballas (753,000 shares), Kim Eng Securities (523,000 shares).