Category Archives: Investments

Overview of Investments in Indonesia

investmentsAbundant natural resources, a young and technically trained work force, a large and growing domestic market, a conducive investment climate following nearly two decades of vibrant democratic rule and a higher global profile have made Indonesia a desirable investment location. This has resulted in higher investment inflows and a more vibrant choice of investment options for Indonesians. Lets take a look at some of the main investment choices available:

Equities

Company shares, also known as ‘equities’, have been one of the most popular choices for investors looking to grow their money over the long term. History has shown that equities have typically outperformed other investment types over the long run, including bonds and cash held in bank deposits.

Bonds

Bonds, also known as fixed income securities are debt instruments created for the purpose of raising capital. Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects.

The following types of bonds are available in the Indonesian Stock Exchange (IDX):

Corporate Bonds are bonds issued by National Private Companies, including BUMN and BUMD.

Government Bonds are bonds issued by the Government in accordance with Law No. 22 Year 2002, including :
▪ State Bond (Including Bond Retail/ORI)
▪ Treasury Bills (T-Bills)
IDX
Corporate Sukuk are fixed income instruments that are issued based on Sharia principles and in accordance with Bapepam-LK Rule No. IX.A.13 concerning Sharia Securities.

State Sharia Securities/SBSN are securities issued by the Government based on Sharia in accordance with Law No. 19 Year 2008 concerning Government Sharia Securities (SBSN).

Asset-Backed Securities (ABS) are debt securities issued with underlying assets as the basis.

Mutual Funds

A Mutual Fund is an instrument that is used to collect a pool of money from investors to be invested in a portfolio of securities by an independent, professional fund manager in order to maximize returns and diversify risks for investors.

The following types of mutual funds are available in Indonesia:

Money Market Funds  They only invest in debt securities whose maturity date is less than a year. Their main target is capital preservation.

Fixed Income Funds  These funds invest at least 80% of their assets in debt securities. These funds have a relatively higher risk than money market funds. Their  purpose is to produce stable returns.

Equity Funds  Mutual Funds that invest at least 80% of their assets in equities. Because they invest in stocks, they have higher risks than the previous two types of Mutual Fund. However, they give higher rate of returns.

Discretionary Funds  This type of Mutual Fund invests in both equities and debts securities.

Islamic Mutual Funds that invest in Shariah-compliant securities are also available. As of December 2013, there were 65 Islamic mutual funds in which saw a 12.1 percent increase in assets in 2013.

Schroders, First State Investments, BNP and Manulife are some of the leading mutual fund providers in Indonesia.

Investment Plans

These are tailored investment products that are engineered to meet your risk profile and financial goals. They may or may not have an insurance component attached to them. The Citibank Regular Investment Plan is a prominent example.

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