Indonesia's financial services regulator hopes to have finalized by June a new regulation to allow investment managers to include offshore assets in their mutual funds as a means to diversify their portfolios to reduce risks. "Several investment managers have been asking for this regulation. We're still discussing the details on how many percentage [of the portfolio] should be allowed, because we have to consider the impact to the development of local products, as well as the risks," Nurhaida, a deputy commissioner in charge of monitoring the capital market at the Financial Services Authority (OJK), told reporters in Jakarta on Tuesday.
Sardjito, also a deputy commissioner at the OJK, said the regulator would issue a regulation for both conventional mutual funds and Islamic-based mutual funds. "The regulation isn't intended to have more Indonesians investing overseas, but to take advantage of the current situation," he said. The Indonesian Stock Exchange (IDX) gained 24 percent last year, becoming the fourth-best performer in the region after the Philippines, India and China. But it lost 1.6 percent so far this year, the second-worst performer behind China. "It would be great if we can issue this regulation within the first half of the year," Sardjito said.
The regulation will come at a time when Indonesia expect to see a large amount of funds pooling in the country, namely from the government's new universal pension program. "The new universal pension program will create a super fund in Indonesia, which over time could potentially create a bubble in the price of the country's assets," said Michael Tjoajadi, president director of investment firm Schroder Investment Management Indonesia. The country's national pension fund BPJS Ketenagakerjaan now manages over Rp. 187 trillion ($14 billion) in assets. Starting in 2014, all 100 million Indonesian workers are required by law to pay 5 percent of their salary to the BPJS.
Investment firms in Indonesia have been calling on the OJK for the regulation, citing the shallowness of the country's capital market compared to rival markets such as Singapore and Malaysia. The IDX currently has 508 listed companies with a market capitalization of Rp. 5,171 trillion, the biggest in the Southeast Asia region. Yet, the figure only equates to less than half of Indonesia's gross domestic product. The combined market capitalization of Malaysia's 906 listed companies in Bursa Malaysia equals to 88 percent of its GDP, while 775 listed companies in Singapore Stock Exchange equals to 150 percent of that country's GDP. The IDX hopes to add another 32 firms to the local stock exchange this year.
Source: The Jakarta Globe, 20 January 2015