Pension funds to up investment in stocks

Rendi A. Witular, The Jakarta Post, Jakarta

Indonesian pension fund managers are likely to invest more money into the stock market next year amid strong gains in the soaring equity market, according to a pension industry association executive.

"Pension funds will try to rake in as much as possible from the stock market next year to take advantage of the bullish trading there," Satino, chairman of the Indonesian Pension Fund Association (ADPI) told The Jakarta Post on Wednesday.

Satino said the amount of pension funds to be allocated into the stock market next year would increase by around 8 percent, or about Rp 5.83 trillion (US$647 million) compared to this year's 6 percent allocation, or around Rp 3.42 trillion.

The Jakarta stock market registered a weekly yield of 4.15 percent last week in U.S. dollar terms, making it the world's fourth most lucrative bourse.

Total investable funds managed by pension funds were expected to grow by as much as 18 percent to some Rp 67.2 trillion next year from this year's estimate of about Rp 57 trillion.

Satino said some 30 percent of the total investable funds would be put into government bonds, 20 percent in corporate bonds, 20 percent in bank deposits, 8 percent in equities, 5 percent in mutual funds, and the remaining 17 percent in property and other portfolio investments.

Satino said the increase in the allocation for equities next year was attributable to the limited amount of bonds available in the market, prompting investors to look to other investment portfolios deemed to be more lucrative.

The Jakarta Composite Index ended higher by 0.24 percent or 2.305 points at 961.324 on Wednesday, to another record high on extended buying in selected blue chips. Trading volume was 2.79 billion shares worth Rp 1.96 trillion.

Analysts said the continuous surge in the Index was primarily attributable to the decline in demand for U.S. dollar-based assets due to a falling American greenback, triggering foreign investors to seek more lucrative places for their money.

Other positive sentiments driving up the Index is optimism for further improvement in the country's economy next year, with the new government pledging to improve the domestic investment climate.

But other analysts said the rally in the Index was caused by intervention from the government, which plans to sell its minority stakes in a number of banks next month via the stock market. It is believed that state-owned pension funds and insurance firms had been instructed to buy shares in order to drive up the stock index.