BCA has lacklustre trading debut

Despite the lacklustre debut of BCA, a wave of capital-raising among Indonesia''s banks is expected to continue.

The initial public offering of Indonesian PT Bank Central Asia got off to a lacklustre start on JakartaÆs stock exchange, with the shares getting bid up no higher than Rp 50 rupiah or 3.6% higher than its 1,400 rupiah ($1.64) initial share price. Analysts described its trading debut as ôencouragingö though, saying despite the performance, more banks would head to the equity markets to raise new funds.

"BCA appears undervalued. The response today was muted," said Don Hartman, regional banking analyst at Salomon Smith Barney in Bangkok. "But you can't blame the market given such a tough trading environment. Despite BCA's strength in its own market,investors really couldn't be bothered to wade through the country specific risks and buy it on the merits of its franchise.ö

BCAÆs debut comes in the midst of continuing political and social problems in Indonesia. A combination of social-political unrest and an administration being ripped at the seams by corruption charges has engulfed the nation and continues to cripple the stock-market. But as economic observers remark, BCAÆs IPO needed to happen and set the ball rolling for other capital-hungry banks in Indonesia.

Already, the market is turning itself to other upcoming recapitalization exercises and share sales of IndonesiaÆs banks. In Jakarta yesterday, a leading lawmaker said preparation for the recapitalization of Bank Danamon is in progress. Sukowaluyo Mintorahardjo, a parliament commission chairman, said Bank DanamonÆs recapitalization, which involves the merger of IndonesiaÆs largest private bank with eight other banks, would not take place before mid-June. Danamon is likely to raise at least Rp29 trillion rupiah ($3.4 billion) in new funds.

Analysts tracking IndonesiaÆs banks are looking at Bank MandiriÆs future IPO as well. ôThe next bank IPO we are looking out for is Bank Mandiri. ItÆs got a very aggressive restructuring story to tell,ö said SalomonÆs Hartman.

Bank Mandiri is expected to come to the market in less than a year. Mandiri is a new bank formed from the merger of four large but distressed state banks. Like BCA, Mandiri has transferred its bad debts to IBRA, IndonesiaÆs Bank Restructuring Agency. The government cleaned up its balance sheet and ended up with a 76% stake in the new merged bank. And also like BCA, Mandiri will come to the market with a very lopsided balance sheet. It too will boast an asset porfolio, the majority of which is packed with government bonds, while loans will make up less than 10% of assets. But analysts are already betting between now and the time it decides to list, the bank will be able to provide some very heartening statistics to investors wanting to back Indonesia.

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