Youthful Demographics Make Indonesia A Wise Place to Invest, Swiss Bank Says

Francezka Nangoy, Jakarta Globe

Switzerland-based Bank Sarasin remains bullish about its investment in Indonesian assets given its view that sustainable domestic consumption is driving the economy.

“We do invest and will continue investing in Indonesia,” said Burkhard Varnholt, the bank’s chief investment officer.

He said the bank currently has $100 billion in assets under management globally but refused to reveal the proportion held in Indonesia. But he said the region would likely be more heavily weighted in its portfolio than the size of the market would appear to justify. “We do have a bias for Asia over Western countries,” he said.

He said the bank’s investment in Indonesia had been increasing because of the strength of the economy. He said he was confident that economic growth powered by demographics and the aspirations of young consumers could be sustained for at least a decade.

Indonesia’s $813 billion economy, which expanded by 6.5 percent last year, is forecast by the government to grow 6.5 percent again this year. Many international investors, especially institutional ones, remain bullish about the long term prospects of Indonesia’s economy despite recent skittishness.

“The story remains. The fall in the our market is temporary. Investors will come back here again,” Rahmat Waluyanto, director general of the debt management office at the Finance Ministry, said in a text message to the Jakarta Globe on Tuesday.

Varnholt disagrees with some assessments that Indonesian stocks are overpriced. He said he did not think that a comparison of price-to-earnings ratios between markets was as important as comparisons of the ratio historically.

“When you see historically, price-to-earnings ratios are cheaper than they used to be in the past, that is just another reason to be more positive about the Indonesian stock market,” he said.

The average PE of stocks listed in Indonesia is 14.3 now, according to data from the Indonesia Stock Exchange (IDX). The ratio is used to compare a stock’s market value to its book value. It is calculated by dividing the current price of the stock by the latest quarter’s book value per share.

Varnholt said that Bank Sarasin did not treat its investment on a country basis, but rather chose its investments based on companies’ performances.

Some of the factors considered include assessments of how companies see and respond to the growing population, manage their intellectual capital and corporate structure. He declined to identify individual companies Bank Sarasin is investing on.

He said the company had “loyal and longstanding clients” in Indonesia, through its branch in Singapore.

Indonesian financial markets, including the equity, foreign exchange and debt markets, have been under selling pressure recently as some foreign investors seek to cash in the gains they have made in the local stock market.

Indonesia benchmark stock index, which rose 3.2 percent last year, has fallen 2.7 percent so far this year, the steepest fall among its peers. The rupiah, which depreciated 71 percent against the dollar during the Asian monetary crisis more than a decade ago, has weakened 4.4 percent against the greenback this year.

Bank Sarasin, set up in 1841, is a leading Swiss private bank. Bank Sarasin acts as an investment adviser and asset manager for private and institutional clients, according to its website.