Indonesian mutual-fund assets will probably expand at a faster pace this year as overseas investors increase stock purchases after the country regained its investment grade, an industry group said.
Mutual fund assets may grow as much as 20 percent in 2012 Abiprayadi Riyanto, chairman of the Indonesian Mutual Fund Managers Association, said in an interview in Jakarta yesterday. They climbed 13 percent last year to 168.2 trillion rupiah ($18.7 billion), 36 percent of which was in stocks, said Riyanto, who oversees $2.4 billion in assets as president director of PT Mandiri Manajemen Investasi.
“I expect some of the big pension funds will gradually enter Indonesia,” he said. “If economic fundamentals are good, there will be opportunities to grab new investors, create new fund products and create new investment themes.”
Overseas fund managers had bought a net $331 million of Indonesian stocks this year to yesterday, more than triple the amount from a year earlier, stock exchange data show. Fitch Ratings upgraded Indonesia’s sovereign debt ratings on Dec. 15 followed by Moody’s Investors Service on Jan. 18, allowing some foreign funds whose allocations are restricted to investment-grade countries to buy the nation’s equities.
The benchmark Jakarta Composite index climbed 3.2 percent last year, Asia’s third-best performer, as economic growth accelerated. Southeast Asia’s biggest economy may have grown 6.5 percent last year, Bank Indonesia said in a Jan. 12 statement. That’s the fastest pace since 1996, according to data compiled by Bloomberg.
Emerging market stocks will perform well this year as central banks start cutting interest rates amid easing inflation, Adrian Mowat, the Hong Kong-based chief Asian and emerging-market strategist at JPMorgan Chase & Co., told reporters in Manila on Jan. 31. Mowat is “overweight” on Indonesia, he said.
The Jakarta Composite index closed little changed at 4,015.95. The gauge has risen 5.1 percent this year, compared with a 14 percent gain in the MSCI Emerging Markets Index.
The Indonesian stock index may rise as much as 15 percent this year if Europe is able to overcome its debt crisis, Riyanto said.
The International Monetary Fund cut its forecast for global economic growth this year on Jan. 24 to 3.3 percent from a September estimate of 4 percent, citing a European recession and slowing expansion in China and India. Indonesia’s economic growth may slow to less than 6 percent this year if Europe suffers a severe recession, Bambang Brodjonegoro, the head of fiscal policy at the nation’s finance ministry, said Jan. 25.
“Indonesia’s economy is resilient,” Riyanto said. “But we cannot ignore negative external surprises, which is why we must be careful in maintaining the good perception on the domestic economy.”
Gross domestic product increased 6.45 percent in the fourth quarter from a year earlier, compared with a 6.5 percent pace in the previous three months, according to the median of 17 estimates in a Bloomberg News survey ahead of a government report due Feb. 6. Growth may be between 6.3 percent and 6.7 percent this year, Bank Indonesia said in its Jan. 12 statement.
Inflation slowed in January for a fifth month, bolstering the case for the central bank to keep interest rates at a 6 percent record low to boost the economy as global growth falters.
Lower rates may also support mutual fund asset growth as it improves the appeal of stocks over time deposits, said Riyanto. New fund product offerings last year helped increase the number of unit holders to 463,327 from 353,704 in 2010, he said, adding this doesn’t reflect the actual number of investors as one investor can hold more than one unit at a mutual fund.
Still, that’s less than 1 percent of Indonesia’s population of 237 million, indicating the industry’s growth potential, he said.