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)