Mutual funds performance surpasses expectations

JP/Irma

The mutual funds industry continued to expand vigorously in the first seven months of this year, beating analysts’ expectations despite last year’s financial crisis.

The total value of assets under the management of local product issuers even surpassed analysts’ estimates of reaching the Rp 100 trillion (US$10.1 billion) level by the end of the year.

Data from the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) showed that the total value of assets already stood at Rp 103.6 trillion as of July 31, up 39.4 percent from the Rp 74.3 trillion at the beginning of the year.

Investments with underlying assets in the form of company shares listed at the stock market — also known as equity funds — are the biggest contributor to the growth of assets.

They account for almost 35 percent, or around Rp 36.1 trillion, of assets managed by the industry.

The latest market data, however, showed that a redemption in equity funds caused the total value of
assets managed by the industry to decline to just over Rp 100 trillion as of Aug. 7.

The second biggest contributor to the value of assets is protected funds, which stood at Rp 30.8 trillion at the end of July.

Other contributors included fixed income funds at Rp 14.4 trillion, balanced funds at Rp 13.7 trillion, currency market funds at Rp 4 trillion and sharia funds at Rp 3.7 trillion — all taken as of July 31.

The overall positive performance of the mutual funds industry, analysts say, was mainly driven by the resilience of the local stock market. This drive is positive considering the impacts of the financial crisis late last year and the twin bomb blasts in Jakarta on July 17, which targeted foreign business executives.

Investors reacted momentarily on the day of the attack, causing an unexpected slump of 2.7 percent before gaining momentum again to recuperate losses within just a day of the attack.

According to an overview of market performance in the last seven months, Bapepam stated that the Indonesia Stock Exchange (IDX) was currently the third best performer in the Asia Pacific after China’s Shenzen and Shanghai markets.

The local composite index had risen 66.93 percent as of August 11, while the Shenzen and Shanghai indexes had both soared 92.74 percent and 73.59 percent, respectively.

“We hope that it is a good sign that investors’ confidence [in the local stock market] has started to improve,” Bapepam chairman A. Fuad Rahmany said Wednesday at an announcement of the data.

The IDX authority has been recording a massive inflow of foreign funds entering the market in the past two months.

The latest data showed that foreign investors bought more shares than they sold between Aug. 3 and Aug. 7, with share purchases reaching Rp 8.4 trillion compared to Rp 6.5 trillion in shares sales.

Trisnaldi Yulrisman, director of the Indonesian Central Securities Depository (KSEI), said the total asset value and ownership of securities by foreign investors in Indonesia had grown steadily in the past five months, as they expected the global economic crisis to bottom out at some point this year.

This mind set, he said, would be beneficial and hopefully encourage more foreign investors to look toward emerging markets such as Indonesia for business opportunities.  

KSEI data between July and August 2009 showed that foreign investors owned more than 60 percent of total assets, slightly higher than the 59 percent owned in the same period last year.

This data suggests foreign investors have returned to the Indonesian market after fleeing last year. The IDX composite index collapsed by more than 10 percent last year as foreign investors tried to mitigate the worsening impacts of the financial crisis on their assets by pulling funds from emerging markets.

With the Indonesian economy remaining solid and continuing to grow this year, many analysts believe investors will still have the confidence to invest here.

The better-than-expected earning results of companies in the first half of this year have also injected more positive sentiment into the market, encouraging investors to re-enter the local market.

Due to this promising outlook, IDX president director Ito Warsito remained confident that the local stock market could reach a market capitalization of Rp 2,000 trillion and an average daily trading value of Rp 3.75 trillion by the end of this year.

The market capitalization of IDX stood at Rp 1,878.2 trillion on Aug.  11, making it the second-strongest bourse in the Asia-Pacific region in terms of capitalization growth.

Looking at this bullish trend, Mandiri Sekuritas managing director Mirza Adityaswara said now was the best time for companies to tap into funds in the capital market as an alternative source of financing.
“This is a good time for IPO with the global liquidity improving in line with the global economy recovery,” he said.