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Indonesian pension fund intends to bolster equity, bond holdings

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(Credit: Reuters) People stand in the lobby of the Indonesia Stock Exchange building in Jakarta, June 12, 2013.
Indonesia Stock Exchange
January 5
8:24 PM 2014

The largest pension fund in Indonesia intends to increase its equity and bond holdings this year as it expects local consumption and a potential interest rate decrease in a bid to improve company earnings, Bloomberg reported. From 22% in 2013, Badan Penyelenggara Jaminan Sosial Ketenagakerjaan, previously called PT Jamsostek, will boost the proportion of equities to 25% of total assets by the end of this year. This was revealed by President Director Elvyn Masassya in a Bloomberg interview. He added that the state-owned fund will also bring up its bond holdings from 45% last year to 48% of the total in 2014.

The report said the fund's increased stock purchases last year contributed to the stabilization of the slumping equity market of the world's fourth most populous nation. The Jakarta Composite Index was able to pare losses to close 1% lower last year. This was its first annual decline since 2008 as foreign investors withdrew $1.8 billion on expectations that the US Federal Reserve stimulus would be reduced and amid concerns of Indonesia's current account deficit as well and its declining currency, the report said.

Masassya told Bloomberg, "In the short term, time deposits are providing a more attractive return even compared with equities. However, in the longer run, we have to come back to equities and bonds." He also believes that in the first quarter, there will be a continuation of foreign outflows as the US reduces its bond buying program.

The pension fund also looks forward to an increase in its total assets to IDR 181 trillion in 2014 from IDR 149.8 trillion last year due to the new members it would gain from the launching of a nationwide insurance program. On January 1, the fund was renamed after it became the administrator for Indonesia's social security money, the report said.

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