Pension funds and insurance firms told to buy stocks

Pension funds and insurance firms told to buy stocks

NUSA DUA, Bali (JP): A senior official urged pension funds
and insurance companies yesterday to invest more in the capital
market, rebutting institutional investors' view that time
deposits are more profitable than equity investments.

"Many public accountants make mistakes in their reports on
pension funds which discourage institutional investors from
buying stocks," said Bambang Subianto, the Ministry of Finance's
director general of financial institutions.

Addressing a two-day seminar here on local investors' roles to
increase capital market investments -- organized by the
Association of Indonesian Issuers -- he said pension funds and
insurance companies considered banks' time deposits were more
profitable than equity investments.

"But in fact they are not. And we have found that this
erroneous view is apparently caused by mistakes made by public
accountants," he said.

He said his evidence came after studying 100 financial reports
on pension funds by accountants.

Many public accountants assess capital market income according
to share purchase prices, not according to market prices, he
said.

"The accountants may be careless or not know accounting
standards. Worse still is that pension fund managers and boards
of directors do not know the impact of the mistakes," he said.

He said pension funds calculated their capital market income
by deducting share purchase prices from share sale prices -- when
sold -- plus dividends.

"They (the accountants) only calculated the profit when the
shares were sold," he said.

He said accountants should value share portfolios according to
market prices: "This way of calculation will be more realistic."

Many institutional investors are discouraged because many
pension funds are forced to buy their affiliated companies'
shares in their initial public offerings. But then the share
prices drop, causing losses, he said.

He said domestic pension funds and insurance companies had
US$13.4 billion to invest: "But only about 10 percent of the
total is invested on the capital market."

He said 8 percent was invested in bonds, about 70 percent in
deposits and the remainder in other investments.

The chairman of the Capital Market Supervisory Agency, I Putu
Gede Arisuta, said few locals invested in domestic stock markets.

"Only 500,000 of our total population of 180 million invest in
the capital market... in Malaysia seven million of 30 million
people invest in stocks," he said.

"We aim to have five million local investors in the capital
market in the year 2000," he said.

"We should encourage pension funds and insurance companies to
invest more in the capital market," he said. (bnt)