JAKARTA (TheInsiderStories) - Minister of State Enterprises (SOE) Rini Soemarno would ask public listed state-owned companies under her ministry to buy back shares in order to restore investors confidence in the Indonesian stock market. At midday trading today, the Jakarta Composite Index (JCI) dropped 2.17 percent to 4,345.652 from yesterday closing level at 4,441.911.
“If there are rules on share buyback, we will do it as shares prices have dropped. The State owned companies (SOEs) want to buy back their shares . Now we are in process assessing which companies that have the capability to do it (buyback),” Minister Rini Soemarno told The Insider Stories on Friday.
Financial Services Authority (Otoritas Jasa Keuangan/OJK) has revealed its plan to issue a Circular Letter that would allow the public company to repurchase their shares or buyback. The regulator said most likely the latest capital market stimulus policies will be published towards the end of the third week of August 2015.
In 2013, OJK released regulation on buyback of shares by public companies in the event that the market condition fluctuates significantly without approval of shareholders. The rule said the issuer or listed companies can do the buyback action, if OJK assess that the composite index has fallen down in three consecutive days by 15 percent or more or other conditions set by the regulator.
In response to the buyback plan, three state lenders — PT Bank Mandiri Tbk (IDX: BMRI), PT Bank Rakyat Indonesia Tbk (IDX: BBRI), PT Bank Negara Indonesia Tbk (IDX: BBTN) and PT Garuda Indonesia Tbk (IDX: GIAA) — said that they are considering to buy back their shares to drive up their shares prices. However, other SOEs such as PT Telekomunikasi Indonesia Tbk (IDX: TLKM) said the price of the company’s shares is considered high and therefore it is not feasible to buy back Telkom’s shares at this moment.
Chief Executive Officer (CEO) of Garuda Indonesia Arif Wibowo said, he wants to look to the new regulation first before realizing the buyback action . He added the flight carrier operator will talk with the majority shareholders over the matter before make a decision.
“We are making assessment before making a decision on buyback. We will study the rule first and than take action in coordination with our shareholders,” Arif stated Garuda shares have fallen by 2.49 percent to Rp353 per share at midday from Rp362 on Thursday’s closing.
Alex Sinaga, CEO of Telkom added that at the moment it is not the right time to buy back the company’a shares because the company’s shares price is still high. Telkom shares dropped 2.09 percent at midday Friday to Rp2,810 from yesterday’s level of Rp2,870 per share.
“If the prices fall to below psychological level, we will do it (buyback). Under these circumstances, we are there yet for buyback,” Alex said.
FSA has issued a package of stimulus measures in the capital market sector on July 24, 2015 and in response to the economic situation at the regional and global levels.
Several attempts have been made after the publication of the FSA stimulus package include:
- FSA meeting with 200 issuers and public companies on August 3, 2015 with an emphasis that issuers and public companies helped maintain market confidence while maintaining the application of the principles of good corporate governance (GCG principles), especially in challenging economic conditions as it is today;
- FSA meeting with leaders of 15 professional associations governance field on August 11, 2015, among others, the Institute of Internal Auditors (IIA) Indonesia, Forum Communications Director of Compliance (FKDKP), Association of Certified Fraud Examiners (ACFE) Indonesia, and the Indonesian Institute of Audit Committee (IKAI), with the aim that the associations referred to take an active role in guarding the application of good corporate governance principles by the perpetrators of the national financial services industry; and
- FSA meeting with the management of state-owned companies and a subsidiary of state-owned companies on August 18, 2015 in order to increase interest and readiness as well as accelerate the process of going public of state owned enterprises and subsidiaries of SOEs in order to support the Indonesian capital market deepening. (*)
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