Indonesia eyes lifting of rules on share issues-exchange

JAKARTA, Oct 29 - Indonesia is looking at lifting restrictions on share issues, the head of the stock exchange said on Thursday, a move which could increase fund-raising for companies, improve liquidity, and attract more investors.

Indonesian assets have soared this year, thanks to a combination of political and economic stability and increasing risk appetite from investors.

The benchmark index <.JKSE> is up about 70 percent this year. Analysts expect investor interest to remain strong thanks to the prospect of economic growth and more initial public offerings, spurred by tax incentives and other measures. [ID:nJAK501792]

Ito Warsito, president director of Indonesia Stock Exchange, said that the capital markets watchdog, Bapepam, is currently considering a change to regulations on the issuance of new shares.

Indonesia requires a company to issue shares using pre-emptive rights, whereby shareholders have first right of refusal to buy the new shares.

"Currently they have to offer to the existing shareholders if they want to issue new shares of above 5 percent," Warsito told Reuters on the sidelines of a meeting with foreign correspondents.

"Bapepam is still in the process of asking inputs from the market. Some ask for 20 percent, some ask for 15, 10 percent. 20 percent may be too high. It'll be higher than now and it's quite important for firms," he said.

Rajiv Louis, head of investment banking for Indonesia at PT UBS Securities Indonesia, said the use of pre-emptive rights prevented companies such as banks from being able to raise capital quickly.

"To issue new equity they must do pre-emptive rights issues, which can take four to five months," he said, adding that companies listed in Singapore and Hong Kong can quickly do rights issues, raising the equivalent of 20 percent of their capital without shareholder approval.

However, other regulations which investors are keen to see removed are unlikely to be lifted, Warsito said, in particular the requirement for an acquiring company to sell back 20 percent of the takeover target within a certain time period.

"Maybe it's one of the things that we also should think about but not in the near future," Warsito said.