Investment Funds

Apr 28th, 2010, in Business & Economy, by

Foreign fund flows into Indonesia and the major mutual and exchange traded investment funds.

As the JSX Composite Index has continued pushing into record territory just above the 2900 mark, seeing it ranked as top yearly performer out of 20 Asia-Pacific benchmarks, there is concern that the market is in a greatly over-valued bubble, ready for a burst with disastrous consequences.

Jakarta Composite
12 month performance of JCI

Much of the rise in values has been caused by an influx of foreign funds, with some bankers and officials calling for controls on capital inflows to be put in place as a brake.

Perry Warjiyo, a former Executive Director of the IMF and now head of Bank Indonesia economic research and monetary policy division agrees that the market is considerably over-valued, but says that Bank Indonesia will persist in its policy of no restrictions on inflows, even while BI is becoming increasingly “cautious” about the volume of money coming in.

Foreign Mutual & Exchange Traded Funds

Meanwhile of the most well-known foreign and offshore funds in Indonesia, these sectors of the market attract the most interest:

  • Financial (20%)
  • Energy (15%)
  • Consumer Staples (10%)
  • Telecommunications (10%)
  • Materials (10%)
  • Industrials (10%)
  • Consumer Discretionary (8%)
  • Utilities (5%)
  • Money Market (5%)

And the most commonly owned companies in rough order of precedence:

  • Telkom
  • Astra International
  • Perusahaan Gas Negara
  • Bank Central Asia
  • Bank Rakyat Indonesia
  • Semen Gresik
  • Gudang Garam
  • Adaro Energy
  • Bumi Resources
  • United Tractors
  • Unilever Indonesia
  • Bank Mandiri
  • Tambang Batubara Bukit Asam

Fund Performance

The major mutual and exchange traded funds focused on Indonesia. Given that most invest in the same sectors and companies, their returns largely mirror each other. In all the charts below the blue line is for the actual fund, the red line for the fund’s benchmark index.

Allianz RCM Indonesia

Allianz RCM Indonesia

Cumulative % performance of Allianz RCM Indonesia fund:

YTD 3m 6m 1y 3y 5y
14.06 6.46 14.96 153.14 51.00 134.97

Fidelity Indonesia

Fidelity Indonesia

Cumulative performance of Fidelity Indonesia fund:

YTD 3m 6m 1y 3y 5y
15.87 7.03 16.83 113.73 70.78 196.87

JP Morgan JF Indonesia

JF Indonesia

Cumulative performance of JF Indonesia fund:

YTD 3m 6m 1y 3y 5y
16.50 7.23 17.58 125.14 74.96

Market Vectors Indonesia ETF

Market Vectors Indonesia

Cumulative performance of Market Vectors Indonesia ETF:

YTD 3m 6m 1y 3y 5y
15.88 7.98 15.70 121.07

23 Comments on “Investment Funds”

  1. Oigal says:

    The biggest problem is the lack of clarity and shareholder duty of care on ownership and board decisions in Indonesia. Current practices of withholding information on profit,loss, insider trading, convoluted ownership structures are common place here but would not be tolerated on any mature market.

    Big money to be made (and lost) but primarly on picking the next market manipulation rather than rational business assesment.

    Even your example of the most common owned companies contain some very good companies and some who could only be classed as Pirate Vehicles for the most obnoxious in Indonesia. In fact one, is that overly loaded with Toxic and illegal debt that in any other country the directors would already be under lock and key.

  2. David says:

    Fair enough, and I think the volumes are often quite low aren’t they? So easily influenced, or that word you use, ‘manipulated’. Even with the funds above the volumes can be quite low.

    Also the fund managers, not sure any of them have set foot in the country, talked to anyone, they’re in Singapore or even further away.

    On the other hand I’ve been reading Zero Hedge website recently and the spleen and derision with which they talk about companies like Goldman Sachs and whole American and European financial and business systems generally is eye-opening. But they’re talking mostly about banks and money market type investment companies and such.

  3. Oigal says:

    True enough and the Warren Buffet advice still rings true to all investors. “Only invest in things you can understand and know” Goldman and the rest of the vultures didn’t even understand what they were selling and when they did they then bet against their own clients. Unethical is unethical no matter what country you are in.

    I think you need to draw a line between investing in companies and “investing” in funds. If you take the time to understand the fundamentals then over the long term you should do ok when investing in reputable companies on a reputable stock exchange. Fund investment means you are placing all your trust in the knowledge and ethics of a third party. To be honest its nothing more than a straight out gamble. Don’t get me wrong, if you get the right fund with the right managers, its very easy way to “invest” but there is no knowledge or ability involved on your part. I invest with a few funds but it is just sheer luck that I survived the GFC.

    Talking of fundamentals, if anyone can detail the fundamentals explain the Bumi, Telecom share price for instance, I would be much obliged. I alway thought they were resource and telecommunications companies but all I can see is shims and mirrors. However that is just an opinion.

  4. Waduh, Waduh,

    Oiglety Poiglety.

    How’s these for fundamentals:

    * 230 million + consumers

    * Southeast Asia’s biggest economy: various estimates of GDP, up to $350 billion, maybe more.

    * Suffering perceptual undervaluations of index due to terrorism, natural disasters, which have very little impact on ‘fundamentals’.

    => Big opportunity for those who understand the macro-politics of what’s going on.

    Yes, there’ll be ups and downs, but following what Mr. Buffet said, invest in what u know.

    Index funds are an investment in the whole economy, Oiglety-Poiglety. Go take a look in the supermarket, if you can stop hyperventiliating about corruption.

    As usual, hardening of the categories. I ever think maybe it happens to all of us ‘of a certain age.’

  5. Chris says:

    I put a small amount of money in a campuran (“mixed”, i.e. some equities/stock, some other) managed investment fund a few years ago.

    Its performance has been up and down, actually down and up. I bought it at Rp12 500, in December 2008 it was Rp6000 and now its Rp15 500.

    However, for expats the performance/increase in value can be reduced or negated by a sudden decrease/depreciation in the value of the Rupiah.

  6. Oigal says:

    Well thanks for for the update Dikki, it appears that you know about same about the economy and market fundamentals as you do about everything else…3/5ths of 5/8ths of FA.

    Are you seriously suggesting Bumi is under valued? Laugh….

    Number of consumers are you serious?? Let me know when you want to talk about p/e ratios, debt, loan structuring and provisions in comparsion to like industries around the world. Also about reporting regulations, audited and posted qaurterly results in a robust market.

    Seeing how you are the expert perhaps you can advise us on the dynamics of say for instance PT Telekomunikasi Indonesia being appointed to advise on the “restructure” telecommunication tower of subsidiary PT Telkomsel.

    Is it true that the restructure cost shareholders over US$4.26 billion in stock value? When where shareholders advised of the impact (more to the point who was)? Now I don’t know the answer to any of the above, just asking some pretty simple questions a tad more intelligent than “they have shedloads of customers in a protectionist market, they must be successful”

    Or perhaps a considered comment on Bumi, my understanding its debt to equity ratio is 2.3 times compared to Indonesian industry standard of 1.5. You may wish to discuss the impact of the tax dispute and the debt for equity swap with China (so much for the National Company myth). I admit its all a bit jalan tikus for me but I am sure you can guide us all in the ways of the Bumi.

    Index funds are an investment in the whole economy,

    Aww really??? Thanks for blindingly obvious! Never the less, you are reducing the risk by diversifing but gambling on the fund manager (Did you miss last year?). The fact remains there is indeed big money to be made in the Indonesian Stock Market but I would dispute that many have the access to information and data most mature markets would consider normal practice.

    Stick to lame insults and lick spittling you are out of your depth anywhere else.

  7. Geordie says:

    * 230 million + consumers

    Addtreesable market? That’s unlikely and particularly in telecoms.

    True there may be hundreds of millions of SIMs in the market but, as I understand it from my colleagues still in situ, what were in my opinion very sensible (from an investor’s point of view) criteria for a) defining what characteristics customers have and b) an approriate period of time when a customer no longer satisfied that criteria to now where we have a situation where it’s now very hard not to be considered a customer.

  8. @ Oiglety,

    It’s true, I am ever a humble Betawi Bongo player. But on whoever said you were qualified to manage your own superannuation: you should ask for your money back.

    I would never look seriously at P/E here, let alone valuations from locally based houses, because they are usually more fictional than the sexual exploits of the armchair Aussie rules fan.

    And yes, it is ever unfortunate that Bumi is such a big player in the market.

    My bet is a much simpler one: anyone here knows more than the screen jockeys in New York, so keep that in mind and bet against them when they get jittery over foolish things (like the election) as Bules are prone to do.

    Unfortunately, though, no one who knows anything about what’s going on is going to share the information with a hyperventilating, self-righteous local Bule. (Except maybe the likes of Soros).

    @ Geordie: other industries besides telcos. 230 million’s just a ballpark figure. Cigarettes, construction, retail, not to mention foodstuffs. Infrastructure also looks to be big, although hasn’t lived up to promises in the past. Power sector regulation and reform also one to watch, depending on what they do with the law and supporting legislation.

  9. Oigal says:

    “My bet is a much simpler one: anyone here knows more than the screen jockeys in New York, so keep that in mind and bet against them when they get jittery over foolish things”

    Nothing like a bit of science. Back against the trend….weeee! New Investment theory for us all…not

    Actually our simpering fool, take out your lame and ..*yawn* bule baiting then you essentially agree with everything I said although I note not one new piece of information (no suprise there).

    other industries besides telcos. 230 million’s just a ballpark figure. Cigarettes, construction, retail, not to mention foodstuffs. Infrastructure also looks to be big, although hasn’t lived up to promises in the past. Power sector regulation and reform also one to watch, depending on what they do with the law and supporting legislation.

    🙂 Straight off the back page of the Jakarta Post. You could read that paragragh a thousand times and still not find a gram of substance.

    Is there one sentence that does not deserve the responce “no Sh*t sherlock

  10. Oigal says:

    As for managing my own super, a blind man with a dart, would do better than the also ran no hopers (both foreigner and national) that infest Asian Cities like Jakarta pretending to be “in the know”

  11. David says:

    Nothing like a bit of science. Back against the trend….weeee! New Investment theory for us all…not

    Well, not that long ago there was that Turkey military coup fear business, and if you had gambled that it would all blow over, as it did, you could have done modestly nicely out of the ishares Turkey ETF as it buckled, and then recovered after it blew over.

  12. Geordie says:

    I do apologise DS but it did appear that you were responding to Oigal’s issue with Bumi and in the context that it is a telco.

    I accept that there are other industries than telco but even so, 230+ million in any single veritcal looks to be overstating the addressable market per se. There may indeed be 230 million active consumers in the economy but it’s quite a stratified market with not so much social mobility and in that context, work I did back in the day suggested (again for telecoms) 21 micro segments that could be aggregated into eight macro ones in terms of evaluating adrressable market size and drivers.

    It was estimated, at that time, that there is a significant minority of people who could never be provided with mobile telecommunications profitably and this is what my erstwhile colleagues are cheifly preoccupied with; that is, in an effort to bolster subscriber growth, profitability drivers are being sacrifieced to a degree that is deeply concerning.

    If you look, as I did when I was back in Jakarta last week, at the offers from all the MNO, it’s hard to see how offereing 1000 free sms, 100 free minutes (albeit on net) would not reduce ARPU significantly and dilute price/minute to the point of being negligable. Typically investors look very closely at this kind of stuff, I know, we’re in the midst of IPO here and our reports are carefully scrutinized for just this kind of thing.

    For the avoidance of doubt, I have worked in Indonesia and other developing markets including stints in various East African countries and I have to wonder at the longevity of the business model seemingly prevalent if my recent trip is anything to go by.

  13. Odinius says:

    Good for Indonesia.

    I will second Oigal’s quote of Warren Buffet, though, and also add that people will want clarity for ethical reasons too. Some of these investments are tearing down primary rainforest to make way for hugely destructive palm oil plantations, mines and other things that investors may not agree with. Others may employ Indonesians at far below living-wage–another thing investors may object to.

    It’s always a good idea to know what you’re getting into.

    On the other hand, I think we should all take a moment and realize that something good is actually happening in Indonesia, and if the economic growth continues, a lot of the things we complain about on here will lessen. Some won’t, of course, but a lot will.

  14. Mr. Patoengs,

    Actually, this might be quite a good topic to keep alive and active.

  15. Oigal says:

    Absolutely, agree with all comments here (ok except Assmads personal insecurity issues). The gains to be made in Indonesia as with all emerging markets are significantly more than would be normally expected in a “mature” market however the lack of clarity increases the risk to almost a gamble stage.

    Having said that a number of “serious” and professional companies run for the benefit of Indonesia and shareholders (as opposed to mud producers) are emerging. They release details that can be accessed and tested in the international market. One very large energy company starting with “I” would be a good one to have.

  16. realest says:

    What goes up, must come down. Be patient and play long ball. :/

  17. sputjam says:

    These hedge fund guys are like locust. the swarm the market in huge groups, forcing the value up, and then dmp the whole lot for the locals to salvage whatever that is left.

  18. Odinius says:

    As long as China is hungry for natural resources, demand for Indonesian exports will be high. Not just because of trade with China, but because aggregate trade with China leads to greater overall competition for natural resources.

    If–or perhaps when–China’s economy stalls, then Indonesia is going to have problems.

  19. sputjam says:

    there was no china factor in asia in 1997, nor in mexico therafte, nor argentina which followed.

    Now those hedge fund guys are playing with commodities which they found to be lucrative.

    speculative trade in forex are many times more than that required for actual trade.

    the best way to prevnt future recurrence of a financial crisis, is to ban speculative trade.

    But US/UK and the west made so much money from these biz that it will be tolerated for years to come. same with singapore, the regional banking centre.

  20. David says:

    There’s a new Indonesia ETF just released a few days ago, from ishares, EIDO, so now there are two. Really bad timing though, everything is getting pummeled.

  21. Oigal says:

    But US/UK and the west made so much money from these biz that it will be tolerated for years to come

    I do hope you are going to deliver the breakdown on Islamic Bonds, Sharia Banking as well. Crooks and double dealers don’t seem as focused on the mythical East meets West boundries as some.

    If you really want to do an honest expose’ of “East” biz and how it should be done for the benefit of the nation and its people, I can think of none better than our patriotic saviour Bakrie himself.

  22. Chris says:

    Interesting update from The Jakarta Post, especially considering how most international stock exchanges haven’t post their pre-Great Recession highs of 2007:

    JCI closes above 4,000, sets new all-time high

    Jakarta Composite Index (JCI) closed up 1.63 percent at 4,003.69 points on Friday, having set a new all-time high during the day’s trading.

    The index opened at 3,939.75, and breached the 4,000 psychological barrier at around 3 p.m., setting a new record high of 4,005.69 points.

    The surge was attributed to a strong close on Wall Street overnight, with other Asian markets showing gains throughout the day. The Nikkei touched a 4-month high, and China reported closing a third straight weekly gain.

    Leading the gains on the Indonesian bourse were Indo Tambangraya Megah (ITMG) closing up 5.36 percent to Rp 47,150 per share, and Astra International (ASII) which closed up 2.96 percent to Rp 67,800 per share.

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