Jamsostek to reduce investments in bank deposits

Jamsostek to reduce investments in bank deposits

The Jakarta Post, Jakarta

State-owned social security firm PT Jamsostek plans to cut its
investment in bank time deposits this year amid the current low
interest rate environment.

The director of investment at Jamsostek, Samuel Tobing, said
on Friday that the amount of money put in time deposits would be
reduced to around 40 percent of the company's investable funds by
the end of this year, from the current 50 percent.

"But we'll do it (the withdrawal) gradually," he said,
pointing out that withdrawing the money at once would cause
serious trouble in the banks.

He said that Bank Mandiri, the country's largest bank in terms
of assets, received the largest part of Jamsostek funds allocated
to time deposits. But he declined to mention the figure or give
details about the withdrawal plan.

Over the past two years, the central bank has been
aggressively cutting its benchmark interest rate amid a benign
inflationary environment. This has triggered the commercial
banks to also cut their interest rates on time deposits, which
currently stand at around 6 percent. The real interest rate is
much lower if last year's annual inflation of more than 5 percent
is taken into account, thus making time deposits no longer an
attractive investment alternative.

In comparison, the country's high flying stock market, which
last year surged to record highs and is considered one of the
best performing markets in the world, provided better yields for
investors. So also do government bonds carrying fixed interest
rates of around 11 percent.

Samuel said that Jamsostek would increase the share of its
investable funds in bonds, both government and corporate, this
year.

Currently, the share of investment in bonds is around 35
percent.

He said that this would increase to 40 percent, equal to the
portion to be allocated to time deposits. Some 8 percent would
be allocated to the stock market, while the remainder would be
invested in other areas, such as property.

Jamsostek last year managed around Rp 26 trillion in funds.
Samuel said the amount was projected to increase to Rp 31
trillion this year.

He said that the increase would come from higher returns on
its investments in various instruments as well as from a rise in
the number of workers participating in the company's insurance
and pension schemes.