Indonesia allows companies to buy back own shares without shareholders' approval

JAKARTA - Indonesia's financial services authority has allowed publicly-listed companies to buy back their own shares - up to 20 per cent of their total capital - without shareholders' approval.

The agency issued this rule late on Tuesday night, just four days after it passed a regulation allowing such a buyback - on condition that the stock market index declines by 15 per cent or more within three consecutive days.

The change came as the Jakarta Composite Index fell below the 4,000 level for the first time in a year, according to Bloomberg data, but rose to close at 4,026 points on Wednesday.

It had declined as much as 3.3 per cent earlier during the day, but turned around after state pension fund managers, including the largest Jamsostek, bought shares.

The rupiah, which has fallen about 13 per cent against the US dollar over the past year, hit 10,945 against the dollar on Wednesday.

Ongoing conditions also saw Bank Indonesia (BI) deciding to call an unscheduled meeting of its board of governers on Thursday to evaluate the latest situation.

The central bank says this is an additional board of governors' meeting and does not replace the next monthly meeting that is scheduled on Sept 12.

BI decides interest rate policies and discusses other monetary measures in these meetings.

Mr Perry Warjiyo, a BI deputy governor in charge of monetary affairs, told reporters on Wednesday that the discussions would focus, among others, on efforts to reduce Indonesia's current account deficits, ease pressure on the rupiah exchange rate, and inflation.

Several economists predict that at the Thursday meeting, the board will decide to raise the country's benchmark interest rate, which is currently at 6.5 per cent, after a 0.75 percentage point rise in the past two months.

A raised interest rate may attract funds back.

wahyudis@sph.com.sg