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Jiwasraya sends ripples through industry
State-owned insurer PT Asuransi Jiwasraya’s investment mismanagement case has had a ripple effect on other companies in the financial industry
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span>State-owned insurer PT Asuransi Jiwasraya’s investment mismanagement case has had a ripple effect on other companies in the financial industry.
Insurance companies, investment management businesses and even cooperatives have been reportedly having liquidity problems after the Jiwasraya revelations.
On Feb. 12, privately-owned life insurer PT Asuransi Jiwa Adisarana Wanaartha (WanaArtha Life) issued a letter to its policyholders acknowledging that its securities accounts had been frozen by the Attorney General’s Office (AGO) in connection with the office’s investigation of a corruption case pertaining to Jiwasraya’s fund management.
On Jan. 24, the AGO ordered the suspension of 800 securities accounts related to Jiwasraya as part of its ongoing investigation to uncover alleged corruption in the ailing insurer, which is suspected to have resulted in the company’s failure to repay policyholders’ claims totaling Rp 16 trillion (US$1.17 billion) as of January.
The suspension itself disrupted the insurer’s ability to pay its policyholders, president director Yanes Matulawata wrote in the letter.
“The management deeply understands the policyholders’ concerns, and we apologize that we can’t fulfill the policyholders’ claims at this time following this unexpected event that is out of our control,” he said.
Another life insurer, PT Asuransi Jiwa Kresna (Kresna Life Insurance), has encountered a similar problem; its policyholders have reportedly been unable to cash in their their unit-linked insurance products, Protecto Investa Kresna and Kresna Link Investa (K-LITA), since Feb. 11.
The insurer, which reportedly collected Rp 8 trillion from purchases of the two insurance policies, has decided to roll them over for an additional six months to prevent customers from bolting in fear that the insurer will have the same fate as Jiwasraya, Kontan reported.
Customers of Kresna Asset Management (KAM) were also reportedly unable to redeem their mutual funds due to liquidity problems, but the company has dismissed the reports and has asserted that its customers are indeed able to redeem their mutual funds.
The Financial Services Authority (OJK) has issued a statement saying that neither KAM nor Kresna Life Insurance was involved in the Jiwasraya case and that their businesses were running normally.
Despite efforts to calm investors, a source told The Jakarta Post that some lower-tier investment management firms could be having liquidity issues.
“Fund managers below the top 20 could be facing liquidity problems after the Jiwasraya case because some of their products contain penny stocks that have been suspended by the bourse,” he said.
On Jan. 23, the Indonesia Stock Exchange (IDX) temporarily halted trading of five stocks implicated in the Jiwasraya investigation, namely fishery company PT Inti Agri Resources (stock symbol IIKP), property developer PT Eureka Prima Jakarta (LCGP), property holding company PT Hanson International (MYRX) and coal miners PT SMR Utama (SMRU) and PT Trada Alam Minera (TRAM).
The Jakarta Composite Index (JCI) declined steeply following the AGO’s suspension order.
Since Jan. 24, the JCI has declined by 6.04 percent. Weekly trading closed at 5,866.94 on Friday.
Shinhan Sekuritas vice president of investment banking Bayu Swantono feared that the bearish market was caused by a domino effect from the Jiwasraya case.
IDX surveillance and compliance director Kristian Manullang, however, denied that the suspension had affected the market and blamed the rout on the 2019 coronavirus (COVID-19) outbreak instead.
Some suspected that the JCI’s decline was caused by missing “market makers” following the AGO’s suspension because daily average transactions had declined to Rp 6.42 quadrillion year-to-date as of Friday, 29.53 percent lower than last year’s figure of Rp 9.11 quadrillion.
MNC Sekuritas equity analyst Thendra Chrisnanda said the presence of market makers in the IDX was hard to prove, but their effect could be felt by all market players.
“That’s why, when the case was revealed, our transactions quickly declined by 30 to 40 percent,” he said, referring to the Jiwasraya case.
In a bid to boost trading and liquidity in the bourse, trading director Laksono Widodo said on Jan. 10 that the bourse was working on a regulation to allow brokerage firms to be market makers to boost trading on less liquid stocks with good fundamentals.
“We hope that the regulation can be issued by the second half of this year,” he said.
The OJK summoned on Friday the Indonesian bourse’s self-regulatory organizations — consisting of the IDX, the Indonesian Central Securities Depository and the Indonesian Stock Market Clearing House — as well as market players and associations to discuss the current market condition.
Indonesian Securities Companies Association chairman Octavianus Budiyanto said the meeting aimed to calm investors during a time of negative sentiment and uncertainty.
