`Investment in Indonesia Promising and Safe
By Park Hyong-ki
Staff Reporter
Investing in overseas equities is an opportunity investors should not miss at a time when volatility is increasing on the Seoul stock market amid the credit crisis stemming from the subprime turmoil, said an executive of Credit Agricole Asset Management (CAAM) Asia.
Introducing the ``Indonesia Focus Fund'' Thursday, Ray Jovanovich, chief investment officer of CAAM Asia, said that Indonesia remains highly attractive both at macro and corporate levels, posting solid growth over the years after the financial crisis in the late 1990s. The Paris-based CAAM operates a joint venture with Nonghyup, NH-CA Asset Management, in Korea.
Jovanovich said that Indonesia's growth is driven by three key factors ― young demographics, rising consumption and infrastructure investments.
Although the chief analyst believes India is Asia's most attractive destination for equity investment given its strong growth potentials, Indonesia and India share similarities as both economies are not really integrated with global economies.
This means that Indonesia does not rely heavily on external factors for growth, but is a ``real market'' driven by internal growth such as consumption.
``Indonesia is a smaller version of India. It is a young nation that has rich resources and high consumption,'' Jovanovich from Hong Kong told a press conference in Seoul.
He noted that unlike other Asian economies that depend on exports for growth, the Southeast Asian country's consumption accounts for two-third of its GDP growth.
Also, rich energy resources in Indonesia, a member of the OPEC, will further propel its economy going forward.
The CIO said, after the financial crisis, Indonesia has revitalized its economy with confidence being restored in foreign direct investment, and it has strengthened its capital management.
However, he said there exist geographical risks, as the country is known to suffer from natural disasters such as tsunamis and earthquakes. Also, the lingering subprime turmoil is clearly challenging Asia, not to mention inflation.
``Subprime has nothing to do with Asia, but it has been a collateral victim,'' said Jovanovich.
He expects the subprime trouble to cause periodic volatility in U.S. stocks for the next three to five years, and challenge Asian exporters. He said inflation is more of a concern for China than any of the other economies.
But the CIO said Asia is steadily being de-linked from external factors. He added the premium of Asian capital markets, including Korea and Indonesia, remains intact, and will continue to draw increasing attention from global investors. ``Money chases growth, and Asia will continue to do well in 2008.''