Pension funds stay with banks

Pension funds stay with banks

JAKARTA (JP): The country's pension funds continue to put most
of their money in bank deposits despite the sharp drop in
interest rates, investment analysts said.

Director of PT Citicorp Securities Indonesia Rizka Baely said
on Wednesday that about 90 percent of the total Rp 20 trillion
(about US$2.35 billion) in pension funds was deposited in banks.

"Only about 10 percent of their money is put in stocks and
bonds."

He said the unbalanced investment reflected the investment
fund managers' worries about the country's portfolio investment
climate.

Most of the managers are taking a "safety first" approach in
facing the uncertainty, he said, adding that the strategy was out
of the question at more stable times.

Interest rates, which peaked at 70 percent in July last year
in conjunction with the government's tight monetary policy to
ease high inflation pressures, have gradually decreased in recent
months. The rate on the three-month deposit, for example, has
returned to the precrisis level of about 13 percent to 14 percent
per annum.

Rizka said that investing in the stock market should
theoretically yield higher returns than putting money in banks
because most of the shares were undervalued.

Senior economist Syahrir agreed that it was now time to enter
the stock market because many shares were already undervalued,
especially those in the consumer goods sector and ones that are
export-oriented.

He advised pension funds to enter the market now and hold
their investment at least until after the presidential election
in November.

He said the strategy would give them higher yields than the 13
percent interest rates currently offered by domestic banks.

Syahrir, president of PT Syahrir Securities, based his stock
market prediction on a turnaround in the country's economic
indicators.

He said that economic growth this year was projected to be
minus 1 percent, compared to minus 13.7 percent last year.

The inflation rate, which reached as high as 77.6 percent for
the whole of 1998, has continued to decline since early last
year. But it has been in negative territory since March; August's
inflation was minus 0.93 percent, compared to minus 1.05 percent
and minus 0.34 percent in July and June.

Syahrir also predicted that the rupiah would strengthen
against the greenback at the end of the year. He said that
anticipation of a stronger rupiah would fuel positive sentiment
on the local stock market.

Foreign investors, he added, would interpret a strengthening
of the rupiah in the near future as a message to enter the stock
market.

Syahrir said that investors should stay away from property
shares because the recovery of most companies in the sector was
not predicted in the near term.

"I don't recommend that anybody invest in the property sector
until at least another five years from now," he said. (udi)