Fortis predicts further mutual fund industry growth

The Jakarta Post , Jakarta | Wed, 08/15/2007 1:19 PM | Business

The Jakarta Post, Jakarta

Despite current global market jitters, Indonesia's mutual fund industry will grow by between 5 percent and 10 percent toward the end of the year after climbing by 44 percent during the January-July period, an executive of fund manager PT Fortis Investments said Tuesday.

President director Eko P. Pratomo said the mutual fund industry was highly likely to see on-year growth in assets of more than 50 percent on top of the Rp 50.87 trillion (US$5.46 billion) reached at the end of 2006.

As of July this year, the industry booked a net asset value (NAV) of Rp 73.67 trillion, reflecting a 44 percent increase.

""The rise during the January to July period was contributed by a 128 percent increase in the NAV of equity funds from Rp 8.25 trillion as of December 2006 and 45 percent in fixed income funds ... from Rp 18.86 trillion,"" he said.

Eko said the growth was propped up by macro economic improvements indicated by two main factors, the inflation rate and the benchmark interest rate set by Bank Indonesia, the nation's central bank.

The year-on-year inflation rate was recorded at 6.06 percent in July while the benchmark rate stood at 8.25 percent.

The local financial market has been affected by the global market turmoil triggered by concerns over U.S. subprime mortgages. Uncertainty has gripped the local markets, with the Jakarta Stock Exchange's Composite Index tumbling and the rupiah depreciating against the U.S. dollar.

However, Eko said further growth in equity funds amid the fallout was not impossible if investors were aware of the long-term nature of equity investments and the importance of balancing their asset allocations in mutual fund investments.

""In the long term, equity investments will bring positive returns as equity values show a rising trend in the midst of short-term ups-and-downs in value,"" he said.

Data from the Capital Market and Financial Institution Supervisory Board (Bapepam-LK) showed the equity funds' portion of the mutual fund industry's assets rose from 16 percent in 2006 to 26 percent in the first semester of this year. (12)

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