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Friday, March 5, 2010

DNI Regulation not to Apply to Portfolio Investment

Friday, 05/03/2010 00:00 WIB

DNI Regulation not to Apply to Portfolio Investment
Irvin Avriano A.

JAKARTA: Bapepam-LK confirms portfolio investments in the capital market will be free of the investment negative list (DNI) regulation.

Chairperson of the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) Ahmad Fuad Rahmany said foreign investors now didn't need to worry about having their investments curbed by DNI regulation.

"So, foreign investors don't need to worry if they only make investments, not own companies," he informed after meeting with Head of the Investment Coordinating Board (BKPM) Gita Irawan Wirjawan in Jakarta yesterday.

He continued most of foreign investors entered the bourse only to make investments, not to acquire controlling shareholders. Therefore, their existence would not affect publicly listed companies' decisions in doing corporate actions.

Fuad added the exception was also in line with foreign investors' period of investment, which usually was less than a year since they only eyed gains from stock trading.

He revealed that during the meeting with the Head of BKPM, Bapepam-LK was not asked for inputs for DNI formulation since it was the domain of each industry sector. Therefore, Bapepam-LK would also not regulate details related to DNI.

"So far, the capital market regulations have nothing to do with DNI. So, we have to separate them, so foreign investors don't need to worry about, for example, rights issue," said Fuad.

On the same occasion, Gita Wirjawan said DNI would only regulate foreign investors controlling majority shares in publicly listed companies. The Board would stick to the regulation and the Capital Market Law as the benchmark. "So, the regulation will only apply to rights issue."

Hold rights issue
In response to the development, analyst at PT Syailendra Capital Lanang Trihardian viewed Bapepam-LK's statement had created certainty for market players.

"At least, things are clearer and better. We don't spend too much energy asking for certainty which parties will be charged with the DNI regulation."

However, he estimated the regulation would curb foreign investors currently having controlling shareholders from doing rights issue since they wanted to maintain their share ownership. In exchange, expansion would be financed more by debts.

Coordinating Minister for Economic Affairs Hatta Rajasa previously stated the government would revise Presidential Regulation 111/2007 on DNI early this month to require publicly listed companies to comply with the regulation.

Minister of Finance Sri Mulyani Indrawati later made further clarification, saying the currently revised DNI regulation would not force old publicly listed companies to change their foreign shares composition since DNI wasn't retroactively applied.

Sri Mulyani added an increase in foreign share ownership in publicly listed companies through the capital market had been referring to the international standard and the Capital Market Law.

Therefore, she emphasized foreign investments in the capital market would get exception (grandfather clause) and be exempted from the requirement to comply with the DNI regulation as inked in Presidential Regulation 111/2007. (Bisnis/iaa/rar/pul/bsi)

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