Mutual funds set up to lure local investors
Mutual funds set up to lure local investors
JAKARTA (JP): Mutual funds are hoping to lure more local
investors into the capital market which is still dominated by
foreign investors.
Many analysts agree that more mutual funds would benefit the
local stock exchange by strengthening the domestic investor base.
The chairman of the Capital Market Supervisory Agency
(Bapepam), I Putu Ary Suta, said the 1995 Capital Market Law had
encouraged the establishment of mutual funds, especially open-end
funds.
The previous capital market law allowed only for closed-end
mutual funds, thereby restricting the growth of mutual funds.
Under the old legislation, only one fund, BDNI Reksadana, managed
by PT BDNI securities, was established.
"Mutual funds will become a good portfolio investment for
investors," said Putu.
Under the new law, 22 mutual funds had been set up as of the
end of last year, including the closed-end fund BDNI Reksadana,
according to Bapepam data.
The value of the funds' total net assets is an estimated Rp
2.28 trillion (US$951.9 million).
The latest mutual fund, Nikko Inti Nusantara Mutual Fund
managed by PT Nikko Securities, was launched last month. Nikko
Securities expects to generate Rp 1 trillion from the funds
within three years. During its inception, the fund secured Rp 370
billion, or 37 percent of its total capitalization, from
sponsors.
Nikko's sponsors include Bank Central Asia, Bank Bali, Bank
Ciputra, PT Indolife Pensiontama, PT Asuransi Kesehatan Indonesia
and PT Asuransi Jiwa Central Asia Raya.
Bapepam is currently in the process of approving several more
mutual funds -- including one from PT Pentasena Arthasentosa,
which is expected to manage Rp 1.5 trillion -- and PT Trimegah
Securities.
Mutual funds are often more attractive to retail investors as
the risks are considered to be lower than direct investments in
stocks.
"The investors do not need to think about how to manage the
investment because the fund managers have it taken care of," said
an analyst from a joint venture securities firm.
In addition, most mutual funds in Indonesia invest the bulk of
their funds in fixed income securities such as bonds and
certificates of deposit.
Nikko Securities, for example, invests around 80 percent in
fixed income securities and the rest in equities.
Fixed income securities are generally the most preferred
investment instruments for their relatively high returns.
Of the Rp 2.28 trillion managed by mutual funds here, around
80 percent of the assets are invested in fixed income securities
and 20 percent in stocks.
JSX president Cyrill Noerhadi agrees with the strategy but
still encourages funds and insurance firms to invest more in
equities. He added that mutual funds were a good place for young
investors to put their money.
"If they do not want stocks and bonds, they can invest in
mutual funds. Mutual funds can provide even higher returns than
time deposits," he said.
A dealer with a local brokerage firm said over the weekend
that mutual funds need to promote themselves to attract more
investors.
The number of local, individual investors in the capital
market is approximately 500,000, or 0.2 percent of the
population. Foreign investors accounted for 60.18 percent of the
trading activity on the JSX in 1996, down from 67.03 percent in
1995.
Most capital market observers agree that the number of
domestic investors will have to increase in the next few years if
the JSX is to become one of the biggest capital markets in the
Asia-Pacific. More mutual funds and the privatization of state
firms should gradually bring the target within reach, as state-
owned company shares tend to promise strong returns and are
likely to entice local investors.
The initial price offering for shares in state-owned Bank BNI,
for example, attracted 192,000 individual investors and 537
institutional investors. The initial share offerings by state
companies PT Indosat, PT Telkom, PT Tambang Timah a few years ago
also attracted many domestic investors. (09)