Domestic investors' base needs to be broadened: Seminar
Domestic investors' base needs to be broadened: Seminar
NUSA DUA, Bali (JP): Securities analysts and businesspeople
have reaffirmed the important role of domestic investors to
strengthen the capital market, which is still dominated by
foreign investors.
The Association of Indonesian Issuers (listed companies)
chairman Rosano Barack said, "We badly need to increase the
participation of our local investors to improve our capital
market's liquidity and to offset the domination of foreign
investors."
Rosano was briefing reporters Friday evening on the conclusion
of a two-day seminar here on the role of local investors in the
capital market.
Minister of Finance Mar'ie Mohammad, who closed the meeting,
urged the share issuers to improve their performances and comply
with the capital market regulations in order to attract new
investors.
Rosano said, "We all agreed to further improve not only our
performance but also the transparency of our companies."
"As our market is still very young -- only 8 years old --
we're still in the process of learning. But we'll do our best,"
he said.
But he conceded that the association needed the cooperation of
other players, such as fund managers, accountants, lawyers, the
regulators and pension funds and insurance companies.
Rosano said that the Association of Indonesian Securities
Companies has also agreed to help pension funds and insurance
companies to better understand the capital market.
Many analysts have expressed concern over the fact that only
0.22 percent of about 200 million people in the country have
invested in the capital market.
As a comparison, about seven million of the 30 million total
population of Malaysia invests in the capital market.
Bacelius Ruru, the director general of state-owned firms, said
that foreign trading on the market accounted for more than 70
percent of total daily transactions.
"But the foreign investors only buy the blue chips. As a
result, more than 40 percent of the listed shares are not
liquid," said Bacelius, who is the former chairman of the
Indonesian Capital Market Supervisory Agency.
He warned that the foreign domination could cause a crash like
the one in Mexico in 1994, when foreign investors sold out their
portfolios in the capital market.
Bambang Subianto, the director general of financial
institutions, urged the pension funds and insurance companies to
invest more in the capital market.
According to PT Danareksa's president, Glenn M.S. Yusuf, the
growth of earning per share in the Jakarta Stock Exchange
averaged at 27.16 percent during the last five years, as compared
to the average 22 percent time deposit interest rates.
Glenn said that in 1996 the growth was 37.7 percent.
"The market is actually profitable. The most important thing
is how we manage the risks in the capital market," he said.
Institutional investors, notably pension funds and insurance
firms, have an estimated total of US$13.4 billion in investment
funds. But only 18 percent -- 10 percent in shares and 8 percent
in bonds -- of the total fund was invested in the capital market.
Seventy percent was invested in banks' deposits and the rest
in various other investments. (bnt)