Pension funds and insurance firms told to buy stocks<\/p>\n
NUSA DUA, Bali (JP): A senior official urged pension funds
\nand insurance companies yesterday to invest more in the capital
\nmarket, rebutting institutional investors' view that time
\ndeposits are more profitable than equity investments.<\/p>\n
"Many public accountants make mistakes in their reports on
\npension funds which discourage institutional investors from
\nbuying stocks," said Bambang Subianto, the Ministry of Finance's
\ndirector general of financial institutions.<\/p>\n
Addressing a two-day seminar here on local investors' roles to
\nincrease capital market investments -- organized by the
\nAssociation of Indonesian Issuers -- he said pension funds and
\ninsurance companies considered banks' time deposits were more
\nprofitable than equity investments.<\/p>\n
"But in fact they are not. And we have found that this
\nerroneous view is apparently caused by mistakes made by public
\naccountants," he said.<\/p>\n
He said his evidence came after studying 100 financial reports
\non pension funds by accountants.<\/p>\n
Many public accountants assess capital market income according
\nto share purchase prices, not according to market prices, he
\nsaid.<\/p>\n
"The accountants may be careless or not know accounting
\nstandards. Worse still is that pension fund managers and boards
\nof directors do not know the impact of the mistakes," he said.<\/p>\n
He said pension funds calculated their capital market income
\nby deducting share purchase prices from share sale prices -- when
\nsold -- plus dividends.<\/p>\n
"They (the accountants) only calculated the profit when the
\nshares were sold," he said.<\/p>\n
He said accountants should value share portfolios according to
\nmarket prices: "This way of calculation will be more realistic."<\/p>\n
Many institutional investors are discouraged because many
\npension funds are forced to buy their affiliated companies'
\nshares in their initial public offerings. But then the share
\nprices drop, causing losses, he said.<\/p>\n
He said domestic pension funds and insurance companies had
\nUS$13.4 billion to invest: "But only about 10 percent of the
\ntotal is invested on the capital market."<\/p>\n
He said 8 percent was invested in bonds, about 70 percent in
\ndeposits and the remainder in other investments.<\/p>\n
The chairman of the Capital Market Supervisory Agency, I Putu
\nGede Arisuta, said few locals invested in domestic stock markets.<\/p>\n
"Only 500,000 of our total population of 180 million invest in
\nthe capital market... in Malaysia seven million of 30 million
\npeople invest in stocks," he said.<\/p>\n
"We aim to have five million local investors in the capital
\nmarket in the year 2000," he said.<\/p>\n
"We should encourage pension funds and insurance companies to
\ninvest more in the capital market," he said. (bnt)<\/p>",
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