Tue, 14 Nov 2000

Fund management firms expect brisk business next year

JAKARTA (JP): Fund management companies expect a brisk business next year as more people have now turned to their services to invest their money, a senior executive of an asset management company said here on Monday.

Citicorp Securities Indonesia Country manager Rizka Baely estimated that the amount of public funds managed by fund management company in Indonesia was expected to grow by 30 percent this year to about Rp 9 trillion (about US$990 million) from Rp 6 trillion in 1999.

Rizka attributed the projected sharp increase in the amount of the funds under the management of the fund management firms to the growing public awareness on the need for a professional to help protect their assets.

"Previously people have only looked at banks, but fund managers have increasingly become an investment alternative," Rizka told reporters in a press meeting.

According to her, the economic crisis taught people the importance of prudential investment management.

During the crisis, public confidence towards the country's banking sector collapsed, as the government liquidated scores of banks.

She said people began to look for places to invest their money other than banks and to have their funds managed by fund managers.

"We receive about Rp 40 billion in fresh funds each month," she said.

Because of the high growth rate, she said, the company had revised its portfolio growth projection to 70 percent next year from 50 percent this year.

Citicorp's portfolio, she said, was now worth about Rp 1.5 trillion and ranked as the largest asset management firm in Indonesia.

Thirty-nine percent of Citicorp's portfolio is invested in state bank time deposits, with another 16 percent in local private banks and three percent in foreign banks.

The remaining 42 percent is invested in Bank Indonesia certificates (SBI), short-term promissory notes.

Rizka said that Citicorp served some 1,500 individual investors and 45 institutions in the country.

"All of our investors who have over Rp 1 trillion with us are domestic investors," she said.

Foreign investors, she explained, entered Indonesia through Citigroup's regional fund managers.

Citicorp Securities is part of SSB Citi Asset Management, a division of Citigroup, which also operates Citibank.

The group's asset management division has investments in 22 markets worldwide with total funds amounting to $397 billion

Citicorp portfolio manager Edwin Chungunco said that his company had no investments yet in the Indonesian equity market, because of its bearish performance.

However, he said, Citicorp planned to offer a service in equity fund management sometimes in the first half of next year to benefit from signs of recoveries in the country's economy.

"We're optimistic on the long term fundamentals of the country and it would actually be a good time to go into the equity market," he said of the low prices stocks are carrying now.

"We're expecting earnings to gradually pick up along with the growth in GDP (gross domestic product)," Chungunco said, adding that GDP growth for next year was projected at between four and five percent.

Foreign investors, he said, were also eying corporate loans offered by the Indonesian Bank Restructuring Agency (IBRA).

According to him, the Rp 8 trillion in corporate loans offered now, were attractive because they came from firms that have been partly restructured.

Regarding foreign direct investment, he estimated that it would remain low, because of the yet uncertain political situation ahead.

"(FDI) would all hinge on whether the political conditions improve," he explained.

But the implementation of regional autonomy next year, he said, might ease part of the political uncertainties, if it helped subdue separatist calls.

However, he warned that political tensions would increase if calls for independence gained strength.

"It's what we call the CNN effect, if it becomes publicized in the media it will provide some degree of volatility for the market. That will spook a lot of foreign investors," he said. (bkm)