Jakarta sees no reason to join underperforming Asean stock trading platform

SINGAPORE - Trading volume on the much-trumpeted ASEAN Trading Link that allows for cross-border trading on the bourses of Singapore, Malaysia and Thailand stood at a measly 0.018 per cent of their total turnover last year, according to Indonesia's capital market supervision chief.

The negligible trading pattern could be a setback for the multi-lateral link that was rolled out four years ago with the lofty goal of hooking up all the ASEAN exchanges and galvanising trading, with Indonesia saying that the Jakarta Stock Exchange will only hop on to the link if the benefits were clear. For now, that remains elusive.

"Basically for us, it's not when to join but does this (platform) really benefit those who have joined," Nurhaida, a commissioner for capital market supervision at Indonesia's Financial Services Authority (OJK), told The Business Times in an interview.

"If this link is available but no one is really using it, that means people don't see the benefits. At least half of the total trading volume should be carried out on the system.

"(So) There must be something that needs to be fixed. That's why we haven't joined (yet)," she added.

One key stumbling block to forming a true-blue end-to-end platform across the exchanges of the ASEAN trio is the absence of a post-trade linkage - each exchange has its own clearing and settlement systems but none is linked to the other. It's an issue that has been highlighted in the past by Singapore regulators and one that was brought up by the Indonesian financial regulator again.

Ms Nurhaida said Indonesia was in active discussions with its counterparts in ASEAN to ensure that when it finally joins the trading link, the post-trade linkages would be "suitable" for its own market condition.

Another grey area is one of jurisdiction, particularly in the event of disputes: "If something goes wrong, which regulator is responsible - that of the investor, the trading platform or the listed companies?"

"We need to sort these problems first," she reiterated.

Ms Nurhaida was in Singapore this week to meet with officials from the Monetary Authority of Singapore and investors to gather feedback for its plan to push for more listings of real estate investment trusts (Reits) by Indonesian firms on the home market.

Indonesia rolled out its framework for Reits listing back in 2007 - five years after the SGX got its act together and successfully wooed over 30 Reits to date - but has only managed to draw one such listing in 2012 by conglomerate Lippo Group.

To court Reit listings, Indonesia has cranked up its efforts in recent months by scrapping double taxation and providing incentives with more policy changes in the offing.

The initiatives are showing signs of bearing fruit. Last year, it was reported that Lippo Group was planning to delist two Singapore-listed Reits, Lippo Malls Indonesia Retail Trust and First Real Estate Investment Trust, and float them instead on the Indonesian stock exchange.

"The big picture here is that one of the government's top priorities is to develop infrastructure which also includes property. We think the right financing channel for property development - as the banking sector on its own won't be enough (to fund this) - is the capital market," said Ms Nurhaida.

"Unfortunately, the current regulation is still not workable for the market as the tax rates on Reits are still high so we are trying to reduce this further... hopefully by the first half of this year," she elaborated.

"A lot of Indonesian assets are listed as Reits in Singapore, more than S$3 billion (in assets). If we can try to get and pull this back to Indonesia, it will be very helpful for our capital market and economy.

"I don't think it will hurt the Singapore market as it has a lot of alternatives and its Reits are not just from Indonesia."

This article was first published on Feb 24, 2016.
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