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Investors looking at LQ45 Futures: Securities firms

Securities companies have expressed optimism that the recently relaunched LQ45 Futures will get a warm welcome from investors who currently have to hedge their local portfolios on overseas markets

Prima Wirayani (The Jakarta Post)
Jakarta
Tue, February 2, 2016

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Investors looking at LQ45 Futures: Securities firms

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ecurities companies have expressed optimism that the recently relaunched LQ45 Futures will get a warm welcome from investors who currently have to hedge their local portfolios on overseas markets.

RHB OSK Securities Indonesia director Hendy Salim said on Monday that investors had started asking about the product following several dissemination programs held by the Indonesia Stock Exchange (IDX) recently.

'€œThey asked about the transaction procedure,'€ he said during the launch at the IDX building in South Jakarta.

Hendy expressed hope that the bourse'€™s trading value would increase after LQ45 Futures launched because investors who traded derivative products outside the country would get on to the local bourse.

Data from the IDX showed that the average daily transaction value of the Jakarta Composite Index (JCI), the benchmark of the IDX, had reached Rp 5.02 trillion as of Monday. The IDX targets to book Rp 7 trillion in average daily transaction value this year.

Meanwhile, Valbury Asia Securities president director Johanes Soetikno admitted that his firm had seen investors'€™ need for this kind of product, particularly for their portfolios'€™ value protection.

'€œOur regulation does not allow traders to take short or sell positions [amid a plunging index] so their funds go abroad for hedging facilities,'€ he said.

He added that the IDX had taken the right step by providing a product that would prevent fund outflows.

Valbury Asia Securities and RHB OSK Securities Indonesia are among eight securities companies that are ready to carry out LQ45 Futures transactions. The other firms are Henan Putihrai, Binaartha Parama, Nikko Securities Indonesia, Pacific 2000 Securities, Trimegah Securities and Universal Broker Indonesia.

The IDX relaunched its LQ45 Futures on Monday, aiming to maintain the stability of the bourse and to offer more investment instrument options and a hedging facility for investors.

The instrument will base its value on the IDX'€™s 45 most liquid stocks (LQ45), and will have contract periods of one to three months.

Indonesian Stock Market Clearing House (KPEI) director Sunandar explained that the instrument would have three series, which were the LQ45 G6 series with a one-month contract period and the LQ45 H6 and the LQ45 J6 with two- and three-month contract periods, respectively.

'€œWe hope that this becomes an initial step for investors to hedge their portfolios so they don'€™t need to just wait when the index declines,'€ he said.

Meanwhile, the IDX'€™s trade and membership director Alpino Kianjaya pledged his office'€™s commitment to providing new and innovative products to lure investors to invest in the local capital market. The bourse authority was mulling the release of new products, which could be an infrastructure-stocks based instrument or even a single-stock based one, following the LQ45 Futures relaunch, he said.

LQ45 Futures was initially launched in 2001. However, transactions were not encouraging as none were recorded in 2008, after having steeply decreased from the previous year.

Universal Broker Indonesia head of research Satrio Utomo expressed optimism that LQ45 Futures would survive this time as the IDX had made several improvements to the product.

'€œThere was a six-point auto-rejection rule at the time, which destroyed trading as it was too narrow,'€ he said, '€œNow a 10-percent auto-rejection has replaced the previous one and it'€™s good for trading.'€

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