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)