Plans for ‘Asean Bourse’ Advance

Jakarta Globe, Ardian Wibisono, April 24, 2010

Indonesia is backing a $1 trillion trading system, but will not be a founding member.

Indonesia has thrown its weight behind plans to establish a common, cross-border stock trading zone linking Southeast Asia’s key equity markets, but it won’t be involved at the outset, the Indonesia Stock Exchange director said.

Reacting to reports that plans were being finalized for a regional trading space to start next year with a market capitalization of over $1 trillion, Eddy Sugito said there were too many problems for Indonesia to jump in early.

Bursa Malaysia chief Yusli Mohamed Yusoff was reported on Friday as saying the Indonesia Stock Exchange (IDX) would be one of five main players in the first few years of the project.

Initial trades on a pilot basis would link the Kuala Lumpur and Bangkok exchanges, with Singapore and the Philippines joining by mid-2011, the Financial Times quoted Yusli as saying. Vietnam’s Ho Chi Minh Stock Exchange is also backing the project, he said, with Jakarta expected to join within two or three years.

But Eddy warned there could be teething troubles.

“We support the initiative for this single Asean exchange but it is unlikely that we will join during the early stages or by mid-2011 since there are many problems to solve and many issues to discuss,” he said. “For example, we have to deal with the infrastructure first, and several regulations regarding disclosure to prevent disputes among the bourses. We also have not gotten to details like how we would deal with settlements, currencies and so on. We’ll also want to be sure of protection.

“So we will look at progress in the early stages, and if we consider it will be beneficial, we won’t hesitate to join — but it is unlikely to be as early as next year.”

Yusli said it was unlikely the system would evolve into a single exchange involving all 10 Asean countries. But he said the project was “on course to create a common trading space between the region’s leading exchanges that would allow investors to trade across borders easily, potentially creating a new Asean asset class.”

“The idea is to create a system to link the trading engines of the different markets to enable electronic trades to go through seamlessly,” he said.

“Whether we will see a common exchange in the near future in my view is unlikely, but we can certainly look at harmonizing all the rules and standards so we have a market that works more seamlessly across borders.”

The five big Asean exchanges say the idea has been kicked around since 2009. They say a single trading platform with harmonized rules, regulations and practices would make the region’s capital markets more competitive and attractive to foreign funds.

There would not be a separate board for the new trading zone — estimated to cover at least 2,500 companies — and all issues quoted on the exchanges involved would be available for trading. Clearing would be by the home exchanges of the stocks traded, with settlement in local currencies.

Yusli said there was “growing interest in the Asean project among stock exchange chiefs from elsewhere in Asia.” The Tokyo and Seoul stock exchanges said they were interested, but had no plans to join.

“NYSE Technologies, the technology arm of NYSE Euronext, the trans-Atlantic exchange that owns the New York Stock Exchange, is developing software designed to link the exchanges to brokers in all the countries involved,” the Financial Times reported.