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By Elizabeth Pisani
510 words
4 May 1990
Reuters News
(c) 1990 Reuters Limited

JAKARTA, May 3, Reuter - Changes aimed at eliminating long settlement delays for Indonesian stocks will upset small traders but should cheer foreign investors, brokers and officials said.

From this week share certificates, which now come in any denomination, must be re-registered in denominations of 100, 500 and 10,000 and trades will be in lots of 500 or multiples of 500. Transactions of less than 500 shares will go through odd-lot traders at a premium to the last traded price, with at least two brokers registered to deal in each listed company and no more than three companies to be handled by any one broker.

"The government is acutely aware of the politics of this. Don't think they would risk being seen to stick one in the eye of the small investor unless it were vital," a broker said.

When Jakarta's tiny market began to thrive last year, the government, under fire because the system appeared to benefit the rich more than the poor, encouraged small investors.

Small investors came in droves, quickly selling for vast profits tiny share allotments in new listings.

"It was all politics. They (the government) forgot that you have to have a market that works," the broker said.

Brokers were left drowning in paperwork and while clumsy certificate sizes were split or reregistered for each buyer, investors sometimes waited weeks for settlement and were reduced to trading photocopies. "Hardly calculated to strike joy into the heart of a European fund manager," a foreign broker said.

Now all those little deals will be bundled by odd-lot brokers. Trading will be smoother, photocopies will be illegal, and foreign investors wanting quick, reliable delivery of large blocks of scrip will be better off.

They will also be able to trade blocks of over 10,000 shares at five pct either side of the last traded price.

Previously, large trades unofficially agreed outside trading hours had to be registered at the last traded price.

The new arrangement still refers officially only to trading done while the market is open, although players are expected to continue negotiating large deals outside.

"This is a boon for foreign investors. In fact investors of all hues would not have been interested in this market much longer without a change," another broker said.

But investors trading less than 500 shares will have to pay a premium and sell at a discount of up two pct of the last traded price.

"The government is trying to keep the more emotional, speculative investors out of the market," a broker said. "It's just not healthy having everyone put in for 100 shares and sell on day one."

Trading this week screeched almost to a halt, with most shares having to go back to the registrar to be repackaged.

"I expect volumes will be well down for two or three months," said an official of the capital markets agency, Bapepam. "But after that, just wait and see how smoothly it will go."


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