Is there hope in the financial investment market?

Is there hope in the financial investment market?

The financial investment climate in the country may be gloomy,
but it can not stopped daring entrepreneurs. The financial market
is also seeing many new enticing investment instruments. Some of
these promise higher returns, but they come with higher risks too.
Which instrument is most secure?

JAKARTA (JP): In the beginning of 2001, many analysts were
optimistic that the rupiah would strengthen beginning the first
semester of this year if the political elite settled their
disputes and the implementation of regional autonomy went well.

But recently, the rupiah was handed a heavy blow, sending it
to Rp 11,500 against the greenback.

Many businessmen were in state of panic. Shop owners at the
computer and electronics shopping centers in Glodok and Mangga
Dua in Jakarta hastily raised the prices of their imported
merchandise. Panic was also evident in money changers in big
cities across the country.

The recent government plan to raise fuel prices, to be
effective April 1, have also prompted traders to hike the price
of their goods, including primary household needs.

The traders in Glodok and in traditional markets have learned
from experience that delayed action on their part could be fatal
to their businesses.

The rupiah closed at Rp 7,100 per U.S. dollar in the Jakarta
interbank spot market at the end of 1999, and was at Rp 9,365 per
U.S. dollar at the end of 2000.

Today, it's about Rp 10,300 per U.S. dollar. This time around,
Indonesia cannot blame it on George Soros. Today many blame the
rupiah's weakness on President Abdurrahman Wahid, his
administration, the opposition parties and his supporters.

Experts at foreign exchange markets initially believed
Indonesia's promising economic growth last year could bear a
brighter outlook for the country this year.

Despite there seeming to be no more safe places or channels to
invest your money in, many investment observers see great
opportunities in Indonesia's financial sector.

According to Lin Che Wei, head of research at security house
Socgen-Crosby Indonesia, the most popular financial investment
instrument these days is Bank Indonesia's promissory notes (SBI)
due to its consistently attractive rates.

"The stock market is not popular now. Share prices are low and
there is no value drive that could boost it. Overall, the bearish
sentiments are due to political uncertainties," Lin told The
Jakarta Post on Friday.

According to Lin, investing money in overseas stock exchanges,
like in the U.S., will be safer and better. Moreover, recently
shares of some companies in the U.S. have witnessed a significant
drop in value due to the economic slowdown.

"Let put it this way, if someone offers his supermarket in
(riot-torn) Ambon for your house in Jakarta, will you accept it
under the current circumstances?" Lin said.

According to investment observer Elvyn G. Masassya, before you
select the right investment instrument, it is important to know
yourself.

"Are you a risk taker or a risk avoider?" he said.

Once you have identified your character, you can select the
appropriate tools to invest your money in.

Since the mid-1997 monetary crisis, many Indonesians have been
holding and saving their cash in U.S. dollars, anticipation more
weakening in the rupiah. While others with a gambling streak have
been speculating the rupiah against the greenback, expecting tidy
profits.

"After few months of playing the U.S.-rupiah game, I have
earned enough to buy a secondhand car worth more than Rp 80
million for my son last year," claimed a housewife from Bekasi.

According to her, she immediately makes a transaction if she
finds a tiny spread between the new and previous exchange rate.

"There's only one rule here: never be greedy! If you wait for
a bigger spread, you'll be a loser."

She is right as there are many who are still "hedging" their
dollars purchased at Rp 13,500 against the U.S. dollar during the
1997 financial meltdown.

So the best financial investment instruments during times of
uncertainty are those that are flexible and liquid, and which
gives high returns.

According to Roy Sembel, a financial expert, such instruments
are found in the money market, example Bank Indonesia's SBI
notes, commercial papers and short-term time deposits.

With these instruments, investors could freely transfer their
savings to other ventures if their rates are no longer tempting.

According to Roy, instruments available in the money market
have been so alluring these days with the upward trend in
interest rates. Under these conditions, investors usually seek
higher yields, whether in the form of rates or capital gains.

"Usually, if the interest rates go up, the most attractive
instrument is the money market," he said.

In terms of security, the money market has proven to be
relatively safe for investment.

Since investing in the money market requires huge capital,
only a small number of people can venture into it. Except for the
central bank certificates, which are designed mainly for
institutions, the value of the other trading papers can reach
between hundreds of millions of rupiah and trillions of rupiah.

But the market offers so many alternative vehicles to attract
clients, including those from the middle income group.

One option is the mutual fund, which has been very popular for
the past few years. With this instrument, operators will invest
your money, along with that of other client, in several money
market instruments agreed upon by the client.

The key in this business is that you -- based on your
knowledge and suggestions from the fund manager -- have to
prudently select the instruments to invest your money in.
However, keep in mind that there is no government guarantee of
your funds in this sector.(See story below).

PT Danareksa, a key player in this sector, recorded 3.01
percent returns in its Melati Dollar investment fund during the
first three months of its launch on Dec. 1, 2000. This is more
than three times the interest earned on dollar time deposits in
state banks (after the 20 percent tax deduction) during the same
period.

Unlike other investment funds, you can kick off your
investment in Danareksa's Melati Dollar package with as little as
US$100.

Besides mutual funds, the capital market also offers bonds.

But Elvyn suggested investors consider a mixed composition or
only buy bonds issued by corporations in U.S. dollars.

"They are much more attractive than bonds issued in rupiah by
the government or corporations ... but there are many such
(rupiah-denominated) bonds offered on the black market to avoid
taxes, and this has really discouraged the market," he said.

As reported, some provincial authorities in Java, Sumatra,
Kalimantan and Sulawesi are planning to issue municipal bonds in
their efforts to seek funds to build moneymaking infrastructures,
like toll roads, or purchase assets to be sold by the Indonesian
Bank Restructuring Agency (IBRA).

Even though the papers are issued by the government, there is
no guarantee the bonds will be a 100 percent safe! So one should
have adequate knowledge of the province's financial record, the
integrity of their leaders, and how the funds are used.

The government has so far issued about Rp 430 trillion worth
of bonds to finance the bank recapitalization scheme. Last month,
the government announced its plan to issue bonds backed by the
sale of natural gas to Singapore.

For many financial experts and observers, investing in
conventional banking services, or other new commodities and
futures exchange markets is not very attractive.

For that reason, many banks and financial institutions offer
attractive "gifts", from vouchers to flashy VW Beetles to entice
clients.

It's sometimes true that honest profits are difficult to make
nowadays. Many spread rumors simply to boost or depress the value
of the rupiah, bonds or certain stocks.

But, fortunately there are still avenues to let your money
grow. Or, do we need help from Soros? (bsr)