Benchmark investors remain unattracted to Indonesian stock
Benchmark investors remain unattracted to Indonesian stock
Rendi A. Witular, The Jakarta Post, Jakarta
Despite a giant leap recorded by the local stock market since
early this year, global benchmark investors remain reluctant and
cautious to pour their money into the market due to a variety of
nonfinancial factors.
Stock analyst David Ferdinandus of Malaysian-based CIMB
Securities said that the recent rally in the stock market here
was driven mainly by small, regional investors who already had a
broad picture of overall conditions in Indonesia.
"The rally cannot be simply portrayed as growing confidence
among investors with regard to the country's situation: It is
just a group of small regional investors who are trying their
luck to earn some gains," David told The Jakarta Post on Sunday.
He said that most of the regional investors were from
Singapore, Malaysia and Hong Kong.
Investors here are mostly seeking short-term gains, since
Indonesia is still categorized as an emerging equity market that
can dish out higher gains compared with those of the more
established markets.
David explained that the country's unfavorable political and
security condition, as well as the lack of investor protection,
capital market openness, financial transparency and labor
standards, had dissuaded larger global investors from coming in.
The Jakarta Stock Composite Index has surged by more than 15
percent in the past four months alone, from 704.498 on Jan. 2 to
an all-time high of 815.444 on Friday, up 38.872 points from the
previous Friday.
Average daily volume last week was 2.01 billion shares worth
Rp 1.18 trillion (US$137 million) compared with 1.74 billion
shares worth Rp 730.89 billion the previous week.
The government has often stated that the rally in the stock
market has served as an indicator of investor confidence in the
country's economy. Several government officials have also used
the rise in the stock index as evidence of the current
administration's achievements in the economics area.
David said that the local stock market could well serve as a
reflection of investor confidence if global benchmark investors
had included the bourse on their list of permissible investment
markets.
Indeed, the country's stock market does not yet feature on the
investment radar of benchmark investors, as reflected in an April
19 report issued by California Public Employees' Retirement
System (Calpers), the largest pension fund in the U.S.
In the report, which was produced by U.S. investment
consultant Wilshire Associates Inc., Calpers still listed
Indonesia as a noninvestable emerging equity market, along with
Morocco, Sri Lanka, Thailand, Colombia, China, Egypt, Pakistan,
Russia and Venezuela.
Calpers, which manages some US$166 billion-worth of funds,
halted investment in Indonesia and Thailand in February 2002,
citing a lack of capital market openness, political instability
and poor labor standards.
On the company's current list of investable markets are
Malaysia, the Philippines, South Korea, Taiwan, India, Poland,
South Africa, Turkey, Argentina, Brazil, Chile, the Czech
Republic, Hungary, Israel, Mexico and Jordan.
Calpers, which invests around $2 billion in emerging stock
markets, is known as a benchmark for global investors when
seeking to invest in an emerging equity market.