JAKARTA: Insurance industry estimates that the target of investment yield set early this year will fail to be met and may grow stagnant.
Head of Statistics, Information, and Analysis at Indonesian General Insurance Association Budi Herawan argued that the negative sentiment from the U.S. economy and European’s debt crisis affects the investment yield from the insurance industry.
He projected the growth in the yield of insurance investment this year to be stagnant compared to that recorded last year.
"However, the yield also depends on an investment manager appointed by the insurance company in selecting a portfolio of stocks. Most of the stock still has good movement," he said yesterday.
The estimation on weakening investment yield from insurance industry is indicated by its financial statement after the end of third quarter of 2011 that will be a benchmark for its financial performance until the end of this year.
Bloomberg's data showed that Jakarta Composite Index was corrected by 4.62% or 185.81 points to 3,835.18 since August 18 2011 to September 16 2011. The lowest level was recorded on August 19 2011 to 4.43%.
This condition encouraged PT Asuransi Allianz Life to reduce its investment portion on stocks particularly after its investment revenue declined in the first half of 2011.
Allianz Life investment revenue declined by 36% from IDR682 billion in the first half of 2010 to IDR438 billion in the first half of 2011, said Allianz Life Insurance President Director, Joachim Wessling.
This was prompted by weakening capital market during such period. Regarding this condition, the company will reduce investment portion on stocks and shift its investment to mutual funds.
The pressure on Indonesian share does not only affect insurance industry as it influences pension fund, serving as large investment on capital market.
This weakening index influenced pension fund industry, primarily in the form on lower assets, said Head of Pension Fund Bureau at Capital Market and Financial Institution watchdog(Bapepam-LK), Mulabasa Hutabarat.
However, JCI’s recent fluctuation did not result into significant changes on pension fund investment portfolio. Pension fund does not directly shift the investment portfolio.
According to him, pension funds have learned from the crisis of lower interest rate in 2008.
At that time, pension funds did not sell equities but bought out when Indonesian stocks plunged.
“Pension fund is a long term fund, so pension fund don’t need to sell equities when the index falls. Pension funds can also invest in money market instrument concerning the liquidity needs,” he said.
Mulabasa added that investment of 123 pension funds as of June 30 reached IDR137 trillion. It is predicted that investment in pension funds may reach IDR150 trillion this year, following three newcoming managers in the industry.
Based on data from Bapepam-LK as of April, the biggest portion was invested in the government securities portfolio, which reached IDR30.63 trillion or 24.35% of total portfolios.
Investment in bonds and sharia bonds reached IDR29.52 trillion (23.47%), time deposits IDR27.44 trillion (21.82%), and equities IDR21.60 trillion (17.17%).
The remaining 13.19% share was placed in mutual funds, land-buildings, share placement, Bank Indonesia Certificate, bank savings, and asset-backed securities.
Mulabasa stated the placement of funds under management by pension fund company may change following the market developments.
Nevertheless, pension fund industry believed the index will bounce back until the end of the year amid Indonesia’s strong economic foundation.
Chairman of Indonesia Pension Fund, Djoni Rolindrawan, stated most listed company booked gain thus it helps the confidence.
“We are optimistic that the index will improve amid better macroeconomic fundamental and companies' performance.”
Djoni, who also serves as President Director of Bimantara Pension Fund, stated JCI who has been declining since early last month interfered pension fund investments.
Nevertheless, concerns over the shift in investments from stocks to other instruments, bond for instance, is not significant.
Portfolio is not much different from the position when the index was still in a rising trend at the beginning of this year. “The investment diversion is not too significant. We believe the index will improve.”
Index correction
Such volatile global market also leads to high volatile in composite share price index and highly dependent on global and regional market movements.
However, the macroeconomic fundamentals in the country remained stable. Some analysts said the index could reduce the negative sentiment from the global market and will be able to post a new record at the end of this year.
The index is still safe as long as it stays above the level of 3,700 and will likely reach to the level of 4,000, PT Batavia Prosperindo Securities’ Head of Technical Analyst Billy Budiman said.
“I recommend the investor to play in short-term first. I think it safe as long as the index can hold above the level of 3.700, which is supported by a stable economic climate,” he said.
Meanwhile, PT Oso Securities’ analyst Supriyadi assessed that stock market is a prospective and promising investment amid the corrected index condition since pension fund has a long-term investment horizon in order to keep the retirement fund of its members.
However, pension fund and insurance should be more selective in choosing a portfolio. (T01/T02/T04/T05/T06/NOM)
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