About 16 publicly listed firms have officially submitted requests to buy back shares with funds totaling around US$412 million after the implementation of a new capital market rule that encourages them to prop up the recent slump in domestic stock prices.

However, analysts said, the move was expected to be short-lived and would not support the market for long as it did not fundamentally address lingering negative domestic and global concerns.

According to company statements published in the Indonesia Stock Exchange (IDX), 16 firms '€” which include state-run coal miner Tambang Batubara Bukit Asam, oil and gas firm Medco Energi Internasional and investment company Saratoga Sedaya Investmana, as well as property developers Bumi Serpong Damai (BSD) and Ciputra Property '€” were all set to buy back their shares in the upcoming three months.

The move was a follow-up to a recent policy issued by the Financial Services Authority (OJK) in April that allows companies to repurchase their floated shares without having to secure approval from an extraordinary shareholders meeting, as required before.

Most of the firms have seen their shares fall by double digits year-to-date.

The OJK aimed for the policy to stimulate growth in local stock prices after a volatile market that has seen a Rp 14 trillion net buy in April turning into a Rp 6 trillion net sell now.

The outflow was an impact of a greater global financial rout backed by a potential increase in US interest rates that made funds flee to there from emerging markets, as well as China'€™s worsening economic slowdown and recent yuan devaluation.

The price benchmark, the Jakarta Composite Index (JCI), lost 20 percent of its value year-to-date and 17 percent since April, becoming the worst performing index in the region.

With the new buyback policy, the companies will now be able to buy back a maximum of 20 percent of their paid-up capital for three months after they submit their buy-back requests.

Most of the companies that are planning to buy back their shares said they aimed to maintain them at a level that fully reflected their actual business performance.

BSD, in its statement, said that by re-purchasing its floated stock, the company expected to have a more flexible and efficient capital structure and lower capital costs, as well as to increase its earnings per share.

BSD planned to buy back shares equal to 7 percent of its paid-up capital.

Shares in BSD have fallen over 12 percent so far this year, better than the broader stock index'€™s 20 percent slump.

Construction firm Nusa Raya Cipta said it wanted a more flexible use of its capital for its future need for equity-based financing, such as exchangeable bonds. Meanwhile, bread maker Nippon Indosari Corpindo said that it was considering floating the shares again in the future with '€œmore optimum prices'€.

Nusa Raya Cipta'€™s stocks have plunged nearly 40 percent since the beginning of the year until recently.

NH Korindo Indonesia head of research Reza Priyambada said that while buy-back might help push up the index, the sentiments would only last temporarily as negative sentiments were still effecting the market.

He was also concerned over to what extent companies were willing to disburse their cash amid the economic slowdown that was squeezing corporate earnings.

Taye Shim from KDB Daewoo Indonesia echoed the view.

'€œShare buy-back should reinforce investor confidence. However, we would like to note that this is not a fundamental reason for a price rebound,'€ he said.

We still believe a sustainable price rebound should hinge on a fundamental earnings recovery,'€ he added.

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