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The Indonesian stock market has recorded impressive growth
both in terms of trading volume and the stock index in recent years,
but a lack of new listings could hamper its future growth, an
investment guru says.
Mark Mobius, an expert on emerging market investment, said Tuesday in
Jakarta that a lack of tax incentives had discouraged Indonesian
companies from floating their shares on the stock market.
Many companies were reluctant to go public as by doing so they would
have to meet strict disclosure requirements that would not only cost
them more, but also prevent them from "avoiding" taxes, he said.
"If they stay private, they can 'escape' taxation," he told reporters.
"In order to encourage them to go public, the best thing is to give
them discounts on their tax payments," he explained.
Despite the impressive growth in the Indonesian stock market in recent
years, market capitalization was still far below other Asian countries
due to a lack of new listings.
Last year, Indonesia's main bourse, the Jakarta Stock Exchange (JSX),
only registered 12 new listings despite a sharp growth in the stock
index and the trading volume.
The JSX Composite Index gained 55.2 percent last year, the highest
growth in the Asia Pacific region.
The JSX hopes to more than double the number of new listings to 25 this
year through a series of promotional events to encourage more initial
public offerings (IPOs).
Mobius, the author of a number of books on investing in emerging
markets, and president of the United States-based Templeton Emerging
Markets Fund Inc., was one of the speakers at Citibank's Alliance of
Experts annual seminar, which was held in Jakarta on Tuesday.
Like many other emerging markets, Mobius said, the Indonesian stock
market had reached record highs due to increased flows of money from
developed countries and regions, such as the United States, Europe and
Japan.
"There is a greater interest now in the emerging markets because of
their higher growth. The economic growth of emerging markets is double
that of the developed countries," he explained.
Mobius said that the average rate of 6 percent growth in the Asian
markets was due to the fact that the Asian countries had learned the
lessons of the 1997 financial crisis well.
"These countries began to save, building up assets and building up
foreign reserves. That gives confidence to bankers throughout the
world, who are then willing to lend money to these countries."
"So people feel that these markets are less risky now. People became
more confident. When people are confident, they put their money into
stock markets, they buy stocks. Particularly if interest rates are low,
they can make more money in stocks than putting it in the bank."
In the case of Indonesia, Mobius said the stock market boom was largely
the result of price increases in the shares of state-owned companies
rather than private-sector ones.
But, he stressed that the most important thing for attracting
investment was the tax regime.
"Again, if you just look at other countries, on how they have been
successful in attracting investment, well, the first thing is tax," he
said.
"Why does Templeton have a big office in Singapore? Because there is no
tax, we have zero tax. We started out with 10 percent tax but then the
government said, you bring more money in and employ more people, then
we will give you zero tax," he explained.
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