Mutual funds set up to lure local investors<\/p>\n
JAKARTA (JP): Mutual funds are hoping to lure more local
\ninvestors into the capital market which is still dominated by
\nforeign investors.<\/p>\n
Many analysts agree that more mutual funds would benefit the
\nlocal stock exchange by strengthening the domestic investor base.<\/p>\n
The chairman of the Capital Market Supervisory Agency
\n(Bapepam), I Putu Ary Suta, said the 1995 Capital Market Law had
\nencouraged the establishment of mutual funds, especially open-end
\nfunds.<\/p>\n
The previous capital market law allowed only for closed-end
\nmutual funds, thereby restricting the growth of mutual funds.
\nUnder the old legislation, only one fund, BDNI Reksadana, managed
\nby PT BDNI securities, was established.<\/p>\n
\"Mutual funds will become a good portfolio investment for
\ninvestors,\" said Putu.<\/p>\n
Under the new law, 22 mutual funds had been set up as of the
\nend of last year, including the closed-end fund BDNI Reksadana,
\naccording to Bapepam data.<\/p>\n
The value of the funds' total net assets is an estimated Rp
\n2.28 trillion (US$951.9 million).<\/p>\n
The latest mutual fund, Nikko Inti Nusantara Mutual Fund
\nmanaged by PT Nikko Securities, was launched last month. Nikko
\nSecurities expects to generate Rp 1 trillion from the funds
\nwithin three years. During its inception, the fund secured Rp 370
\nbillion, or 37 percent of its total capitalization, from
\nsponsors.<\/p>\n
Nikko's sponsors include Bank Central Asia, Bank Bali, Bank
\nCiputra, PT Indolife Pensiontama, PT Asuransi Kesehatan Indonesia
\nand PT Asuransi Jiwa Central Asia Raya.<\/p>\n
Bapepam is currently in the process of approving several more
\nmutual funds -- including one from PT Pentasena Arthasentosa,
\nwhich is expected to manage Rp 1.5 trillion -- and PT Trimegah
\nSecurities.<\/p>\n
Mutual funds are often more attractive to retail investors as
\nthe risks are considered to be lower than direct investments in
\nstocks.<\/p>\n
\"The investors do not need to think about how to manage the
\ninvestment because the fund managers have it taken care of,\" said
\nan analyst from a joint venture securities firm.<\/p>\n
In addition, most mutual funds in Indonesia invest the bulk of
\ntheir funds in fixed income securities such as bonds and
\ncertificates of deposit.<\/p>\n
Nikko Securities, for example, invests around 80 percent in
\nfixed income securities and the rest in equities.<\/p>\n
Fixed income securities are generally the most preferred
\ninvestment instruments for their relatively high returns.<\/p>\n
Of the Rp 2.28 trillion managed by mutual funds here, around
\n80 percent of the assets are invested in fixed income securities
\nand 20 percent in stocks.<\/p>\n
JSX president Cyrill Noerhadi agrees with the strategy but
\nstill encourages funds and insurance firms to invest more in
\nequities. He added that mutual funds were a good place for young
\ninvestors to put their money.<\/p>\n
\"If they do not want stocks and bonds, they can invest in
\nmutual funds. Mutual funds can provide even higher returns than
\ntime deposits,\" he said.<\/p>\n
A dealer with a local brokerage firm said over the weekend
\nthat mutual funds need to promote themselves to attract more
\ninvestors.<\/p>\n
The number of local, individual investors in the capital
\nmarket is approximately 500,000, or 0.2 percent of the
\npopulation. Foreign investors accounted for 60.18 percent of the
\ntrading activity on the JSX in 1996, down from 67.03 percent in
\n1995.<\/p>\n
Most capital market observers agree that the number of
\ndomestic investors will have to increase in the next few years if
\nthe JSX is to become one of the biggest capital markets in the
\nAsia-Pacific. More mutual funds and the privatization of state
\nfirms should gradually bring the target within reach, as state-
\nowned company shares tend to promise strong returns and are
\nlikely to entice local investors.<\/p>\n
The initial price offering for shares in state-owned Bank BNI,
\nfor example, attracted 192,000 individual investors and 537
\ninstitutional investors. The initial share offerings by state
\ncompanies PT Indosat, PT Telkom, PT Tambang Timah a few years ago
\nalso attracted many domestic investors. (09)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/mutual-funds-set-up-to-lure-local-investors-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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